Cal Am uses rate structure to hold recycled water project hostage.

There is a story of water supply on the Monterey Peninsula that Cal Am executives like to tell. Project after project, over decades, has been knocked down by the public, the villain in this story. The company has persisted in suggesting alternative sources.

The narrative looks a little different when Cal Am is the one stalling progress. At issue is an effort to recycle and super-clean wastewater, which is already happening to the tune of 3,500 acre-feet per year at Monterey One Water, with a project called Pure Water Monterey. In 2021, the board of M1W ultimately approved an expansion of that successful project, but not without a lot of foot-dragging by Cal Am and its supporters. (The thinking went that if the region could generate sufficient water with expanded recycling capacity, there would be less motivation for desalinated water – Cal Am’s preferred, and more expensive, option.)

The expansion could provide an additional 2,250 acre-feet of water annually. While it’s M1W, the region’s sewer agency, that will build the project, M1W needs an agreement with someone who will buy the water – a water retailer, like Cal Am – before it can secure construction loans. That was expected to come in the form of a water purchase agreement, carefully negotiated over months. All parties involved – M1W and the Monterey Peninsula Water Management District, and private utility California American Water, which will ultimately deliver the water and bill customers for its use – signed a memorandum of understanding in November 2021.

And a year later, on Dec. 1, finally a quick and easy moment came in the long-running water saga: The California Public Utilities Commission approved the water purchase agreement. No discussion, no fanfare, just a yes.

It seemed like the deal was ready to go. But within a couple of hours, Cal Am President Kevin Tilden sent an email saying that he did not intend to sign the agreement, and the company would file a petition for a rehearing within 30 days.

A private utility needs approval from the CPUC for how much of a project expense it can pass on in the form of billing to customers; in this case, the CPUC’s third-party Public Advocates Office disagrees with Cal Am on how much is appropriate.

“All we need is to get reimbursed, and we’ll gladly sign it,” Cal Am spokesperson Josh Stratton says.

In a press release issued on Dec. 13, Tilden said, “Our commitment to the Pure Water Monterey expansion project is unequivocal.”

Coming from a company that has opposed this sensible recycled water project every step of the way, that sounds like doublespeak. Instead of signing the agreement – and letting M1W go out to bid and get to work on what is estimated to be a $65 million effort – they are holding the project hostage. (Cal Am could sign, and still pursue its rate case, seeking to recover more money down the road.)

What’s next is unclear. M1W is investigating what happens to millions in grant funding that was already secured, but the project is effectively on ice.

Meanwhile the Monterey Peninsula Water Management District is exploring whether there’s an alternative. M1W is a water wholesaler – they don’t deliver directly to my tap or yours. But maybe there’s another way to secure a buyer. MPWMD could buy some water, maybe other public districts. MPWMD’s Water Supply Planning Committee was scheduled to meet on Dec. 14, after the Weekly went to print, and to discuss the potential for such configurations.

It’s a smart project, and one that should be built. And Cal Am should be the one to use the water – the big picture here is that by getting more water into the local supply, the State Water Resources Board might be persuaded to lift a cease-and-desist order, finally allowing more development. (There’s no telling whether the Pure Water Monterey expansion will be enough to persuade the state board, but it might be.)

Another option might be to simply pay the ransom, effectively a $21 million difference in what was requested versus what was approved. “It’s blackmail,” says Public Water Now Director Melodie Chrislock, “but I say, let them have it.”

It’s unknown whether the CPUC will cave to blackmail, but for now, the project is in limbo.

SARA RUBIN is the Weekly’s editor. Reach her at sara@mcweekly.com