1. Policy Position Statement

2. The Community has struggled unsuccessfully for 35 years to find new sources of water Cal Am was mandated to cut back it use of Carmel River water by State Water Resources Control Board WR 2009-60 and subsequent Cease and Desist Order (CDO) With an effective date of reduction of January 1, 2017. The Seaside Basin Decision will restrict the use of Seaside Aquifer water by 2021. To address the crisis and to provide public control, the Monterey Peninsula Regional Water Authority (MPRWA) was formed as a JPA in January 2012. Since all six Peninsula City Mayors comprise the MPRWA and is often referred to as the Mayors Authority The purpose of the Authority as is … to study, plan, develop, finance, acquire, construct, maintain, repair, manage, operate, control, and govern Water Projects either alone or in cooperation with other public or private non-member entities

3. Salt Water Desalination (Desal) - by Deep Water Desal (DWD), Peoples Moss Landing (PML), or Cal Am Ground Water Replenishment (GWR) - by Monterey Regional Pollution Control Agency (MRWPCA) and Monterey Peninsula Water Management District (MPWMD) Aquifer Storage (ASR) - by Monterey Peninsula Water Management District (MPWMD) & Cal Am Pacific Grove Small Water Projects

4. Competitive Economics to minimize Rate Payer Impact Public governance, accountability, & transparency Clear path to permits & construction as close to CDO deadline of Jan 1, 2017 as possible Includes contingency plans

5. Financial Considerations 1. Cal Am must accept approx 50% public funds to reduce interest rate and profit expenses 2. Cal Am must diligently seek lowest electricity rates for Desal 3. Surcharge 2 revenues, if approved by the CPUC, may only be spent on actual construction 4. Cal Am must provide proof of ability to borrow State Revolving Fund (SRF) financing and accept a public agency partner if required by the SRF.

6. Governance and Permitting consideration 5. Cal Am must agree to a Governance Committee for publically accountable project oversight 6. Cal Am must agree to address concerns about intake well permitting to include: -Testimony of Hydrologist Tim Durbin (Dec 2012) -Test wells and advanced geotechnical studies -Working with public agencies to expedite/facilitate permits -Clarifying if federal permits/approvals/ or NEPA compliance are required

7. Contingencies and Risk 7. Develop contingency intake water alternatives that: -Do not include wells in the Salinas Basin -Are developed concurrently with slant wells 8. Consider risks of coastal slant wells to include: -Sea level rise and coastal erosion -Vulnerability to earthquakes -Vulnerability to tsunamis

8. 1. Based on Current Information, The 9.6mgd Desal only, or 6.4mgd Desal with 3.2 GWR, appears consistent with WA policy of: Replacement of Carmel River water & replenishment of the Seaside aquifer Inclusion of lots of record, Pebble Beach allocation, and economic rebound and Pacific Grove Recycled Water Project Reduction of risk through a Portfolio approach Meets Coastal Commission preference for defined service areas and known build-out

9. 2. Cal Am project appears to be more advanced in planning stage than DWD and PML 3. Permitting agencies prefer subsurface wells and may not approve open water intakes without first requiring slant well tests 4. Cal Am is the only Desal competitor to demonstrate an ability to finance a project 5. Cal Am has substantial corporate capital as well as access to Surcharge 2, if approved by the CPUC, and SRF which could reduce project costs

10. 6. Cal Am has access to alternative sources of electricity at competitive cost and which are subject to a larger degree of Authority control than for DWD or PML 7. Final costs of water from the 3 competing projects are close, especially in light of the wide range of variance in price estimates as noted by SPI 8. The DWD option may involve high risk of failure or delay due to need for complex relationships not fully established

11. 9. DWD and PML potentially carry risks associated with DESAL plant placement within the 100 year flood plain 10. The CPUC is conducting the CEQA review for the Cal Am project with less likelihood of successful court challenge than a local agency or private entity CEQA would experience 11. The draft Governance agreement ensures public agency decisions are made where appropriate, deferring to Cal Am decisions best made by the private sector.

12. Water Allocation decisions about water use are to be made locally The EIR should evaluate a full range of plant sizes up to General Plan build-out, though the Authority has only approved a maximum 9.6 mgd project at this time Should circumstances trigger the need, the Authority will request Cal Am, in coordination with the CPUC, to initiate measures to match future water supply with future requirements The Authority supports Cal Ams collaboration with Pacific Grove to produce up to 500 af of recycled, non-potable water per year

13. Given the degree of Authority oversight and measures taken to control project costs, any cost caps should be calculated in a way to avoid project delay or frustrate funding The Authority recognizes that contingency planning is critical for source water intake and brine disposal The Authority approved the concept of a new water service connection fee subject to further analysis as to how, and to what extent, fees can refund project construction costs to current ratepayers