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The California Public Utilities Commission is in crisis and in the headlines and needs help to regain its focus on serving the public interest transparently.

I spent 15 of my 19 years at the CPUC working as its public advisor before leaving in 2004. The Public Advisor’s Office was established by law to help the public participate effectively in CPUC administrative proceedings and to help the commission encourage effective public participation.

From this vantage point, I have opinions about the deeper levels of the problems facing the CPUC than are revealed in the headlines today.

And I outline below some ideas about important needed next steps.

There is no doubt that one of the central problems at the CPUC is what is often called “regulatory capture,” meaning that the commissioners and, to a lesser extent, the staff, become captured by those they regulate.

This happens because the representatives of the regulated utilities have become part of the daily life and habit of the CPUC.

The CPUC is not the only government agency to become captured. It is an all-too-well-known phenomenon among regulatory agencies.

The answer to this problem lies partially in structural reforms like those to ensure that commissioners do not speak to parties in cases outside of publicly noticed hearings.

Preventing regulatory capture also requires the governor to appoint knowledgeable people who have the will and personality to understand their role and avoid being “captured” by the regulated utilities.

A second deep problem is a dirty little secret among those who know the regulatory world of the CPUC that is not discussed in the press.

The dirty little secret is that the CPUC cannot possibly effectively do every job assigned to it.

There are simply too many laws with too many requirements and too few staff.

For example, even if you tripled the five or so staff people the CPUC has who cover gas pipeline safety, they could not possibly monitor every utility installation of underground pipe or maintain their own independent database of the pipes in the ground. The CPUC has only barely enough to audit the efforts of the utilities. Yet many in the public think and expect that the CPUC will be there when all gas pipelines are installed and will have its own independent database of what pipes are where.

One answer to this problem is to have a top-to-bottom independent review of the CPUC responsibilities. Experts and public members of the review panel should examine every law that requires CPUC regulatory action and determine which are truly needed to protect the public safety and health, which are otherwise essential and which need to be rescinded so that the CPUC can focus on its essential responsibilities.

The review needs to examine how many staff are actually necessary to do an effective job for each of the statutory requirements examined by the review panel.

If this is done in a public way, it may also help the state Legislature and the public have fuller understandings of how much varying levels of regulation and oversight cost.

There is no doubt that the CPUC is in crisis. Not only does it need change from within, it must find a way to regain public confidence.

In the last session, the Legislature passed numerous bills that addressed the crisis at the CPUC. Some of these were thoughtful and others not as much. The governor vetoed all of them. It was good to hear that Gov. Jerry Brown has now engaged with the Legislature to try to agree on needed reforms.

It is also clear that the CPUC needs a public, independent review of its statutory responsibilities. If the governor will not appoint such a review panel, then the Legislature should.

This is a much more reasonable and prudent first step to take, especially when compared to the short-lived constitutional amendment proposal to take the CPUC out of the state Constitution.

This proposal asked us to trust that the Legislature would come up with the details of how to distribute the CPUC’s functions and responsibilities only after the fact. Before starting down that road, wouldn’t it be good to have a thorough review of the current statutory responsibilities of the CPUC?

Robert Feraru is a former employee for the California Public Utilities Commission who held several senior staff positions from 1985 to 2004. He lives in Richmond. This piece first appeared in the Santa Rosa Press Democrat in March 2016.

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I read with great interest Royal Calkins’ post summarizing the efforts of Public Water Now members and supporters to work for public water to replace private water historically provided by Cal Am.  The comments I have seen thus far in response are from regular commenters on the blog, so not much new interest seems to have been ignited.

I have been an avid supporter of prior and current efforts by many to accomplish the demise of Cal Am on the Peninsula. The ratepayers of the Monterey Peninsula do not deserve to be the receivers of what is now considered the most expensive water rate in the country.   They deserve to have a public agency, which would, in theory, provide much less costly rates, real accessibility to the decision-makers, and the ability to remove from office at the ballot box those officials who don’t live up to the ratepayers’ expectations.

Trouble is, in order to determine the potential for those lofty and necessary goals and dreams, it is more than necessary to consider the entire context of the ongoing war, which has spanned over several decades and has been fought so hard by the few but incredibly committed and knowledgeable men and women on behalf of all fellow Peninsula ratepayers.

But before discussing the hurdles, this point is important.  George Riley, head of PWN, Ron Weitzman of the Water Ratepayers Association of the Monterey Peninsula, Marc del Piero, and dozens of other activists already are fully aware of the challenges. They have toiled long and hard with their own money and time on behalf of all of you who are affected by exorbitant unfair rates. Many people know of them, have read their commentaries and understand that a few people are fighting for all of them.  But I bet very few people realize all the hurdles that must be overcome.  It is my hope that when the public becomes aware of the scope of the effort they will want to join in the fight.

The hurdles are all known:  politics; the difficulties inherent in the process of acquisition, with all of its legalities and uncertainties; timing; gaining the vocal and active major support across the board from a strong majority of affected ratepayers; and, last but not least, money. And there is another important hurdle, the Monterey Peninsula Water Management District.

It is already known that the mayors, as nominal leaders of their cities, have thrown their support to Cal Am from the very beginning, starting with the formation of a joint powers agreement they formed to work “fairly and openly” to bring the most “effective and cost-effective” water supply to their constituents.  That hasn’t worked out. I am not pointing a finger at any individual but am looking at the wide picture. People who seek public office want to stay there, usually for very good and ethical reasons.  However, they find out immediately that, in order to do so, they need the support of the people who have the influence, time and money to promote those influences. Therefore, the heads of cities financially dependent on the hospitality industry are less likely to take public stances that are not favored by those who have influence in that industry. The cost of water is not so concerning to the industry as it has the means to pass on additional costs to their customers.  As we all know, residential ratepayers do not have that option.  But, probably in the minds of the mayors, the ability to keep the Peninsula’s economy humming trumps their willingness to go to the mat against the California Public Utilities Commission and Cal Am. During the past Measure O effort to acquire Cal Am, guess who dumped lots of cash to defeat the measure. Cal Am with support from hospitality big-wigs. Not a surprise.

There is more than one option for the acquisition process but only one is capable of success. California law gives the authority to local governments to acquire land and assets from private utilities, primarily by simple purchase of through eminent domain. The problem is Cal Am will not sell any of its land or assets. it will not be a friendly negotiator in the eminent domain process and it has publicly stated that it does not fear litigation. So, if even the new measure passes, the cost of acquisition would need to be studied, at a rather hefty price. If it clearly concludes that acquisition is feasible and will ultimately lead to a lesser burden on ratepayers, it could then lead to an acquisition process filled with hurdles.

Timing is critical.  If the process of retaining counsel, etc., is stretched out, the first election date might not be until next spring when other local issues and re-elections take place. That might work for the proponents, but any distraction is a problem.  The campaign needs to attract motivated and committed members of the public who will spend their time and money in full support of the measure. Working against that is the fact that the previous measure fell short in each city on the Peninsula.

Aiding the effort, Cal Am has shot itself in the foot with its outrageous rate increases. More and more people are expressing their anger for having to put up with rates that make water almost an unaffordable necessity.  But even so, a critical mass has not yet coalesced to provide PWN and its fellow activists necessary to make a much stronger statement at the polls. I am not sure if the response to Royal’s piece is indicative of that, but the commenters who posted were persons who regularly do so, and didn’t include any or many new names who are coming on board with their anger and concern.   More work needs to be done and it takes time AND money to do so – both hurdles in themselves.

Money. Cal Am has access to as much money as it needs to fight off its opposition.

Finally, there is the water district. There has been talk of creating a new joint powers agency to take up the mantle and provide public water once Cal Am is defeated.  That option is a hurdle by its very nature – joint powers agencies are formed by two or more local jurisdictions.  Given the political bent of current local jurisdictions (e.g., the cities), there is not much reason to believe that a new combination of the same parties would not end up same old same old.   A better choice is the MPWMD. After all, it is a water district with jurisdiction over the entire Peninsula. It has a large and capable staff and a proven leader in its general manager.  However, the district is not clean of internal hurdles either.  It has been incapable of implementing a solution to the long-standing water supply problem (although the voters rejected some options sought by the District). The makeup of its board and how it is selected need a new look.  Five members of the board represent five districts and are directly elected, and that is good.  However, two members are appointed, one by the county Board of Supervisors and other by a city committee.  The problem is that the statute does not dictate that the supervisor must be from a supervisorial district that represents at least part of the water district’s area of responsibility, and the method of appointing a city representative is completely inconsistent with the actual language of the statute.  More importantly, a supervisor from a district other than supervisorial districts 5 and 2 (the ones that cover part of the Peninsula) has never been appointed, but the statute allows for that not to happen.  And, with respect to city reps, while the illegality of the history of appointing a city rep (which nobody really cares about), there should be a separate agreement that the rep chosen should rotate on a regular basis among all of the six Peninsula cities.  As it has stood, one man, the mayor of the smallest city on the Peninsula, has represented all of the cities for decades. Those with more at risk should have the greater opportunity to sit in that seat.

No matter if the new measure is passed and the water district is named to succeed Cal Am, there are some procedural issues that need to be addressed if the public is going to have its expected access. The district board rigidly follows the three-minute speaking rule for public comment. Perhaps members of the public could petition for spots on the regular agenda rather than having to make a point in three minutes.

Further, no one should expect that a public agency would not raise rates. It would when necessary. Hopefully, that would only occur after hearings in which groups ratepayers with similar points to make could be agendized.

The bottom line is, for public water to really work, the board of the district has to be in full support of the effort and the process has to be transparent and accessible with real, not symbolic,  input from the public.

Bill Hood is the former executive director of the Association of Monterey Bay Area Governments. He is also a retired water lawyer and engineer who divides his time between Ohio and Carmel.

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Public Water Now, the activist group that has been pushing for a public takeover of Cal Am Water, is asking the various regulatory agencies to put the company’s desalination project on hold until it addresses two sticky and expensive issues.

And if the agencies, particularly the California Public Utilities Commission, do agree to a timeout, look for Public Water Now to use some of that time to launch a renewed effort toward a public takeover of the privately owned utility.

In its campaign against the Measure O takeover initiative in 2014, Cal Am argued that it could not move ahead with the complex desalination project while also having to combat a takeover campaign.

Public Water Now leader George Riley would not comment on that possibility this week though there has been talk of a new ballot measure at the group’s most recent meetings. Others involved in the group have hinted at another takeover measure and have said a decision should occur within months.

In a statement attached to the letter to the public agencies, Riley wrote, “Public Water Now continues to focus on the high cost of a new water supply. PWN knows from experience that ratepayers will pay for Cal Am success, delay or failure. PWN continues to believe there will be litigation on Cal Am’s desal proposal. PWN hopes that public officials will pay astute attention to the potential for delay, and possibly failure, from litigation.

“Meantime, the need for a reliable water supply continues. And Cal Am costs continue to pile up. PWN believes that the potential for complete financial disaster to ratepayers can be reduced, if not avoided altogether, if two important issues were addressed soon: 1. the weak science surrounding the test slant well. 2. the lack of water rights.”

Cal Am’s long-delayed desalination project depends on slant-well technology that aims to reduce the impact on aquatic life. For various reasons, including conflicts of interest involving experts involved in the testing, the company has had difficulty demonstrating that planned technology can work here. In its letter, Public Water Now notes that the technology is not in use anywhere.

The letter also points out that as part of its project, Cal Am intends to use water from the Salinas Valley aquifer though it has no rights to the water.

A Cal Am takeover has been the subject of two previous ballot measures, which both went down to defeat. The first was simply advisory. The second, in 2014, would have required the Peninsula water management district to conduct a feasibility study and then to proceed with a takeover if it was deemed feasible.

The measure received 45 percent of the vote, short of a majority. Cal Am hailed that as proof of public indifference to a takeover but supporters of Public Water Now argued that it was a strong showing considering that the water utility had spent millions of dollars on deceptive advertising to combat the effort. The group’s polling showed that absentee voters who voted early, at the height of the Cal Am advertising blitz, favored Cal Am’s position while those who waited to hear response to the advertising heavily favored the takeover.

Likely a significant factor in Public Water Now’s thinking is the fact that Cal Am’s rates have risen dramatically in recent months, in large part because the state Public Utilities Commission is allowing water agencies to charge customers now for water that wasn’t used because of conservation measures during the recently ended drought.

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Thirsty bird.WATER RATES RISE WHILE WATCHDOG WHISTLES

An open letter to the California Public Utilities Commission, Cal Am Water and those who support Cal-Am:

The CPUC, according to Commissioner Mike Florio, has approved a rate increase for Cal Am to make up for revenue lost due to herculean conservation efforts on behalf of the utility’s Monterey Peninsula ratepayers, revenue that he characterizes as “equity” for ratepayers as well as for the utility. Really?

Cal Am’s local manager is also quoted as saying that, in essence, we’ve still gotta maintain our pipeline system regardless of whether we’re pumping more or less water through it.  Sweet.

I understand that maintenance costs are constant, but I would not have a problem with reimbursing Cal Am for those costs  only if the following information was made known.

(1)  To what extent is the money funds sought by Cal Am and approved by the CPUC needed to cover on-oing and past operational and maintenance costs?

(2) To what extent are those same funds dedicated to the historic profit margin Cal Am has gained through several years of CPUC approvals?

(3) Did the CPUC rely upon a full and complete audit of the bases claimed by Cal Am in order to ensure they were accurate and legitimate, or were they supported by clear facts on the record?

The answers to the above questions are important and not covered in any way by the Monterey Herald’s article on this matter and by any public statement by Commissioner Florio.

No matter, those areas of inquiry are complicated and unfortunately have the potential for even more unfair treatment of ratepayers.   Remember, the CPUC has a legislative mandate to protect the interests of both its regulated utilities and their ratepayers.

So, unless clarified and corrected by information not publicly stated, we could conclude as follows:

(1) It is no secret that Cal Am has not always had  a sterling record of maintaining its infrastructure in sound and working condition.  Failure to keep up usually results in higher costs in the long run.

(2) Seeking reimbursement for maintenance costs is meritorious but only to the extent that the costs involved are meritorious themselves, as to amount and necessity and so long as they are not being incurred because of prior failures or negligence.

(3) If an audit was undertaken by the CPUC, why wasn’t that information made public so the public can fully understand the relative elements of the claimed reimbursements?

The conclusion is this:  If, in fact, the rate increase approved by the CPUC includes costs that are not clear or fully fact-supported and, if, in fact, the increase includes the profit historically obtained by Cal Am in prior rate cases, then there is no equity whatsoever in the decision characterized by Commissioner Florio.

In fact, that would mean that Peninsula ratepayers who suffered by undertaking significant conservation efforts will have to suffer for their honorable actions by paying higher rates.   At the same time, Cal Am will come out at least even – costs covered, profits ensured.  One party wins, one party loses. Is that equity in action?

It’s time to take a closer look at the CPUC.  It would seem to not be living up to its mandate.

Hood is a retired water lawyer and engineer who divides his time between Carmel and Ohio.

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????Ready for Cal Am’s 40% rate increase over the next three years, plus another 60% increase for the cost of desal?

Please show up Thursday and take your three minutes to let the California Public Utilities Commission know this is UNACCEPTABLE!

CPUC Public Participation Hearing on
Cal Am’s Water Supply Project
2 p.m. Thursday, Sept. 1
Carpenter Hall in Sunset Center, Carmel

It’s time to make it clear to the CPUC  that its protection of Cal Am’s revenue is excessive, unjustified, and wrong. Ratepayers and their conservation efforts are being penalized to ensure Cal Am’s profits. Residential ratepayers bear the largest burden because of the extreme tiered rate structure. Cal Am is a showcase for investor profit, and the CPUC is complicit.

Here’s what Cal Am wants and what it has already received:

• $100 million ($50 million plus $50 million in interest) for water we didn’t use due to our conservation efforts. This would be an 6% increase in Cal Am rates.

• $51 million in General Rate increases for 2017 to 2020. This would be a 16% increase.

• $130 million ($50 million plus $80 million in interest) for the new Monterey Pipeline. This is a piece of the Pure Water Monterey project. This would be another 8% increase in rates.  An alternative route for a base cost of about $15 million was rejected by Cal Am.

Just these first three total an increase of 30% and that’s with no new water! What other business can get away with this?

• $84 million for the Pure Water Monterey reclamation project that will provide new water. This would be a 10% increase in rates.

• $32 million for failed Cal Am projects from 2004 to 2011 was approved by the CPUC and has already been paid by ratepayers.

• 15% increase for the next 27 years is on current bills to cover the San Clemente Dam removal. This charge will move from a surcharge into the rate base, where Cal Am adds to its asset base. But remember, this was an asset that was removed.  So Cal Am can tear down the dam, but add the removal cost as an asset.

• 60% increase for Cal Am’s desal plant IF it ever gets approved.

• Cal Am has escaped any penalty for failing to meet the December 31, 2016 Cease and Desist Order (CDO) by agreeing to a series of milestones.  If Cal Am misses any milestone, ratepayers will be punished with rationing.

Riley is managing director of Public Water Now.

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Richard Rauschmeier of the PUC’s Division of Ratepayer Advocates addresses about 100 people at Cal Am’s rate hearing Wednesday. At the rear, left, is W. Anthony Colbert, administrative law judge for the PUC.E

EDITOR’S NOTE: Testimony at Wednesday’s PUC public hearing on Cal Am request for 40 percent rate increase indicates the company wants to charge its customers 8.4 percent interest to reimburse the company for loans that cost it 5.4 percent. See story below and additional information from Jane Haines in comment section below. Also, for a different take on the numbers, look for Ron Weitzman’s comments  below Jane’s.

 

 

Public hearings on utility rate increases usually are as predictable as Sandra Bullock movies. Alarmed residents stand up to complain that their rates are too high already and the hearing officer maintains a blank expression throughout.

The Wednesday afternoon hearing on Cal Am Water’s latest increase proved the exception when the hearing officer, a Public Utilities Commission judge, asked Cal Am officials a basic question they couldn’t answer.

Some background.

Cal Am proposes to raise residential water rates on the Monterey Peninsula by 40 percent to make up for money it lost out on over the past five years because its customers did such a good job conserving water. Its view is that its costs remained the same even as usage went down so it is essentially being punished for promoting conservation. Cal Am argues that it was  authorized by state regulators to collect $40.6 million more than it actually collected and it wants to start collecting that money now. It proposes to have its customers pay that off over the next 20 years, plus 8.4 percent interest, for a total of $80 million or so.

Speaking in between a long lineup of angry customers, Cal Am officials on Wednesday told PUC Administrative Law Judge W. Anthony Colbert that the company had been required to borrow money to finance its operations over the past five years because it had not collected the entirety of its “revenue entitlements.”

That’s when Colbert lost the blank expression. He had some questions. He presided over Cal Am’s last general rate case and he indicated that he was somewhat confused by the current request. First addressing Eric Sabolsice, Cal Am’s local operations manager. Colbert wanted to know what the interest rate was on the borrowed money. In a long and winding answer, Sabolsice suggested it was 6.6 percent, but he allowed that he wasn’t entirely sure.

He was quickly replaced at the podium by Jeff Linam, Cal Am’s director of rates. He, too, had a lot to say but none of it included the interest rate.

Colbert repeatedly asked Linam if he knew what the rate was. Linam, hemming and hawing more than a little, finally said he did not.

“We have another hearing at 7 o’clock tonight,” Colbert directed. “Make some calls.” It was not a suggestion.

(The Partisan wasn’t able to  attend the evening session but attorney Jane Haines provides detail on the interest rate in comment section below.)

Other than that, the afternoon session was a model of a public hearing on a utility rate except that the speakers were an unusually well informed group, conversant on the ratemaking process and many of the other water-related issues that have dominated public debate on the Peninsula for the last several years.

Charles Cech is the retired engineer who discovered a severe conflict of interest that forced Cal Am to postpone important testing related to its proposed desalination plant. He told the hearing officer that he had gone back through Cal Am’s filings with the PUC and determined that it had enjoyed a profit margin of roughly 30 percent over the past five years, a total of some $100 million.

Among those able to put the current rate issue in perspective was Melodie Chrislock. She lives on an acre in the Carmel Valley, and, therefore, is a relatively heavy water user. Cal Am’s rate structure is meant to promote conservation by charging significantly higher rates for heavy users. Cal Am says the average residential customer will see the monthly bill go from $45 to $63 if the request is granted in full. Chrislock is above average.

She said her highest bill in the summer of 2008 was $184. This past summer, she used considerably less water but was billed $784. Now, she faces a retroactive charge for the water she didn’t use.

Defenders of Cal Am have noted repeatedly that other water agencies throughout California are raising rates for the same reason but they fail to acknowledge that the rates in those other places are generally much lower. They are mostly silent, too, on whether the other agencies propose, as Cal Am does, to simultaneously reduce rates for commercial customers at the expense of residential customers.

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Mechanical electric kilowatt hour meter register dials macro imageHere’s what Gov. Brown said Friday when he vetoed six bills designed to reform the California Public Utilities Commission:

Parts of some of the bills conflict with others, so I will work with the Legislature to address the issues in a more orderly fashion.

Here’s what he meant:

I’ll work on some of the most innocuous issues for a while and let the meaningful parts slide until everyone has forgotten about them.

Once again, the utility brotherhood has prevailed in Sacramento and the Public Utilities Commission remains its captive. The decision-making process remains a dark and mysterious function understood only by lawyers and lobbyists and designed to slowly and steadily extract as much money as possible from people who have nowhere else to turn for electricity, gas or even water. Here’s a fairly complete story from the Chronicle.

The six bills had been overwhelmingly approved by the Legislature, a remarkable accomplishment considering that the California legislative body, while not nearly as fractured as Congress, is no model of consensus. Some of the bills were approved unanimously.

Among other things, the new laws would have tightened the rules on backroom conversation between the five appointed commissioners and the companies they regulate and would have made it easier to mount court challenges against the bureaucracy when it fails to appropriately respond to requests for public records.

One of the vetoed bills called for appointment of an inspector general to oversee the commission, an important step considering the degree to which the previous chairman, Michael Peevey, allowed the body to be controlled by the utilities rather than the reverse.

Advocates for the legislation say, correctly, that if these laws had been on the books years before, we might have avoided the San Bruno natural gas disaster caused by negligently maintained PG&E pipelines. Soon after the 2010 gas line explosion killed eight, a release of emails revealed secret dealings between Peevey and PG&E, leading to continuing investigations by state and federal prosecutors.

Local advocates for the legislation say, correctly, that if these laws had been on the books, we might have avoided a PUC decision holding ratepayers rather than the utility responsible for the cost of removing Cal Am’s negligently maintained San Clemente Dam.

Current PUC regulations allow private meetings between commissioners and their subjects as long as the utilities report the talks to the full commission. One of the bills would have eliminated a loophole that allows the meetings to remain secret if the parties agree that the commissioners essentially did all the talking. Really.

Even a law firm representing the PUC found last year that the back-channel communications “systematically favor the interests of utilities and other well-funded parties.”

Here is what Brown actually wrote in his veto message:

“Taken together there are various technical and conflicting issues that make the over fifty proposed reforms unworkable … . Some prudent prioritization is needed.

“I am directing my office to work with the authors on drafting these reforms and to ensure the commission receives the necessary resources to implement them swiftly and effectively.”

Let the breath holding begin.

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Businessman chained to a large ballMany knowledgeable people on the Peninsula, including friends and others whose opinions I respect, believe the tarot cards are slowly but surely pointing to an eventual Cal Am demise.   I am reading the cards differently and here is why:

  • There aren’t enough people rising up against Cal Am. Some point to the recent parade of angry ratepayers who spoke publicly before the Cal Am board as a sign of a developing groundswell. That may be true, but in the near and long term, will there ever be the critical mass necessary to accomplish major change? There were people who were angry with the water bill spikes, but that seems now to be ancient history.  A respectable 45 percent of those who voted on Measure O, the Cal Am takeover initiative, clearly opposed Cal Am.  But 45 percent of what number? I recall that the turnout was less than 25 percent of registered voters eligible to vote.  In some cities (e.g., Seaside) the turnout was even smaller. About 11,000 people voted for th measure but Cal Am’s customer base, homes and businesses, numbers some 40,000.

Further, the number of persons who are knowledgeable and willing to be real activists has grown over the past two years, but I would doubt if they currently number more than 500. People join groups like Public Water Now and the Water Ratepayers Association of the Monterey Peninsula but only a very few are truly active and committed on a scale necessary to effect change.

Cal Am has conducted polls and surveys that indicate, according to the company’s vice president for communications, most younger people who have been on the Peninsula for five years or less typically rent and have no serious issues with the company.  And while the older “more conservative” long-term locals (his words) are more concerned, he still maintains that the poll/survey results indicate that the number truly opposed and angry is minimal.

A local water activist has stated that future water rates will have a greater impact on ratepayers so that more and more persons will join the fight to oust Cal Am.  Once again, I am not sure.   After the Herald wrote a good article on the “spanking” that the Cal Am board received from so many citizens at its recent public meeting, I contacted Cal Am’s VP and asked for his take.  He said there were definitely things to learn and Cal Am needs to be more intelligent about rate applications and rate structures. Cal Am and this gentleman are not stupid. I interpret his statement as an indication that Cal Am may revise the way it seeks rates, fees and other costs, and may redesign the tier structure in a way that lightens the future impact on the greatest number of ratepayers. If I were a Cal Am senior officer, I would certainly consider such changes

Cal Am’s communications officer also indicated that the company’s overall PR program needs revitalizing – I don’t know what that would include, but it might include greater transparency and more detailed information on current and future plans, which, like it or not, would also tend to simmer down potential opposition.

  • Unless the California Public Utilities Commission process is statutorily corrected to protect ratepayers, Cal Am may well be able to continue as is as long as it can count on three votes on the commission. Correcting the CPUC process is a longshot, because it would be so politically sensitive that few politicians at the state level could be counted on to become involved. I sent a letter to the area’s state legislators and the governor suggesting changes.  I received a response from Assemblyman Mark Stone but no one else, as I expected. Ratepayers will always be on the losing side as long as any utility can put together at least three commissioners on its side in a rate case, and as long as the CPUC’s Office of Ratepayer Advocates is not recreated as an independent state agency with the authority to sue the CPUC on behalf of ratepayers.   Since commissioners are appointed, effecting change in that regard is almost beyond the ken of anyone on the Monterey Peninsula.  Likewise, without the leadership of your elected officials, you won’t get an independent ORA either.   The likely result:  Cal Am will succeed in its rate cases no matter how many people don’t like it.
  • For the sake of argument, assume that a critical mass does exist and there is another Measure O. What then? This is the area in which think not enough analysis and discussion and/or debate has taken place.  If another Measure O were to pass, perhaps a stronger measure calling not only for a study but the outright acquisition of Cal Am, what agency would do it and how? How much would it cost?  Would the new entity’s ratepayers be protected from future rate hikes?  Would they be assured that their input would be heeded?  Would Cal Am give up and sell out?

A simple review of existing public agencies does not result in terribly positive answers to those questions.

There is some thought that some Peninsula cities would form a joint powers agency to take over Cal Am. But this isn’t small-town Felton, where a takeover did occur. There are six cities on the Peninsula, with no real history of working together for a common goal. Who would be on the board of such a partnership?  Some of the same people who have turned the mayor’s joint powers agency into a money-spending waste of time?

Some say the water district could take the lead. It has the statutory authority and perhaps even the staff to undertake the responsibilities of Cal Am (and could presumably hire ex-Cal Am employees to bolster its capabilities).  However, as we all know the district has not been successful on many fronts, even when it did take the initiative to increase the Peninsula’s water supply. A further problem is that the board’s membership includes two appointed officials, one from the cities, and one from the county. Those individuals, no matter how good-hearted and well-intentioned, come to the board with built-in conflicts and with other issues to distract them from solely water issues.   In order for the district to actually perform in the best possible manner, both of those appointees would have to be replaced by two additional electees, from two newly formed districts. Of course, this couldn’t be accomplished without statutory correction, and the same hurdles against changing the CPUC are in place against reforming the district.

So what is left?  Create a new JPA? JPAs in Monterey County (e.g., FORA) are rife with dissension. Name me a JPA that would clearly be successful.

Consider other agencies, such as the Moss Landing Harbor District or the Marina Coast Water District. Think of the difficulties in bringing together Marina and Peninsula interests that have never been in sync.   Another suggested option would be public ownership contracting out to a private enterprise to build, operate and deliver water to the Peninsula.  Problem is: what agency or what entity could or would represent the public and who would own the water system?   Further, such a contract would require policy decisions, oversight and funding on behalf of the public owners. That brings us back to reviewing the possible government agencies that could do it, which already seems to lead to the end of a cul-de-sac.

  • What about the possibilities of a current private desal project encouraging a local city to form a JPA which, in turn, would acquire the project’s assets and hire private firms to build and operate the desal plant?   In fact, local water activists are in the process of encouraging the city of Monterey to create a new JPA to acquire Nader Agha’s Peoples’ Desal Project at Moss Landing, which is actually ahead of Cal Am in a schedule to obtain permitting and begin construction. Once created, the JPA, representing public ownership, would hire consultants to build and operate the system.  The question remains, however:  a “JPA (Joint Powers Authority)” by its very nature, is a collaboration created by an agreement between two or more government agencies. So, what “other agencies” would agree to participate, and what are the realistic expectations that such an animal, if ever created, would be any different than what we have historically seen?   I hope it can happen, but a seachange in local political collaboration, creativity, initiative and commitment would have to arise where it never has before.  I know and admire my friends who are involved in this effort, and if anyone can, they can.  So God bless – prayers will be required.
  •   Finally, Cal-Am has a lot of money, is determined to remain on the Peninsula because it has been an outstanding revenue source. What does that mean?   For one, the company will almost certainly fight an eminent domain action.  They will not sell. They are not afraid of litigation. They say they care about ratepayer’s concerns, and they will probably take steps to actually go in that direction, but in the end, a good ROI (Return on Investment) trumps everything.

I am running out of options.   I have always supported public water as a concept, but have never had to sit down and figure out if it were handed to me how would I implement it in the best interests of the public. It is not necessarily as inevitable nor as straightforward as some would make out. In spite of all the delays, mismanagement, conflict of interests, data manipulation (as alleged), and so on, Cal Am is still afloat, the CPUC and Coastal Commission have not kicked them out and have barely slapped their hands. My take is a gloomy, negative one, for sure.   But even though I am a public water advocate, I have come to believe that facts and history unfortunately suggest that any grass-root attempt to right all the wrongs is facing great odds.

Bill Hood is a retired water resources engineer and attorney and executive director of the Association of Monterey Bay Area Governments. He lives in Carmel and Columbus, Ohio.

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It was an interesting piece in the Monterey Herald on Thursday, the one headlined “Cal Am makes slant well counteroffer.” It was about Cal Am saying it will eat the costs of the slant well technology if it proves not to work well enough to be incorporated into the proposed desalination plant, but it won’t absorb the costs if the technology doesn’t receive the permits it needs to operate. That’s interesting enough, but there was something else at least equally interesting.

Reporter Jim Johnson’s article quotes from a letter written by Cal Am President Rob MacLean in which he says that obtaining the necessary permits for the test slant well is “complex and requires a tremendous amount of community and political cooperation and support.”

I could be simply misunderstanding the whole thing here, but that line left me confused. The permitting process MacLean is presumably talking involves the regulatory agencies, such as the Public Utilities Commission, the Coastal Commission, the National Oceanic and Atmospheric Administration and others responsible for oversight, generally involving technical, environmental or financial matters.

To my way of thinking, none of that should be affected one way or another by “a tremendous amount of community and political cooperation and support.” Cooperation between the various agencies? A good thing to be sure but not a decisive thing. Community cooperation and support? Also a fine thing, sure, but it isn’t part of any official regulatory equation that I’m familiar with.

I propose we crowd-source this. I haven’t asked MacLean to explain because I was scratched off the Cal Am Christmas card list long ago. Maybe someone who still has a  working relationship with the utility can put the question to him on behalf of those of us watching from the cheap seats. And maybe someone who understands regulatory process better than I do can offer an explanation.

If taken at face value, MacLean’s comment could go a long way toward explaining why this whole desalination process is so difficult and perplexing. Perhaps rather than trying to get the science and technology right, Cal Am has devoted the bulk of its attention to attempting to build “a tremendous amount of community and political cooperation and support” regardless of what is happening on the engineering side of the operation. If that’s what has been happening, considering the company’s stumbles in each of the arenas, we all should be installing cisterns.

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The following is my Aug. 7 letter to the California Coastal Commission’s executive director, Charles F. Lester, regarding the Cal Am test well:

Dear Mr. Lester,

Public Water Now (PWN) is the group that discovered the patents owned by Dennis Williams and Geoscience. PWN alerted the public about potential conflicts of interest. PWN is also the group that has harped on the phrase issued by the State Water Resources Control Board about pursuing subsurface intakes, “if feasible,” prior to pursuing other options.

I am writing to alert you to related issues that I hope you consider in the review of an amended permit for Cal Am, and the follow up monitoring and evaluation of data and circumstances re this test slant well.

PWN is well aware of the desire by you, the State Water Resources Control Board, California Public Utilities Commission, and others in the state that want a successful subsurface intake for desal facilities. PWN is also aware of the environmental reasons, and we do not disagree.

But PWN strongly objects to several factors that are in play, and you have a role in considering them.

How does the CCC remain objective and focused on the facts when it has a obvious public policy to support subsurface intake? PWN questions the depth of objectivity CCC will bring if the overlying policy goal is a successful subsurface intake for desal. Will CCC go the extra mile to guarantee its objectivity and interest in validated data and analysis? Is the CCC open to looking beyond the face value of the data it receives?

The patent royalty relationship between Dennis Williams/Geoscience and the driller –Boart Longyear – has not been queried. Is it possible that substantive financial relationships exist between these two that could cause the data to be skewed to serve ulterior motives? Will CCC look into the contract relationship between Williams and Boart Longyear? Will CCC determine there are no royalty and shared self interests in the contracts or in the actual test well operations that could skew their reports?

Will CCC question the financial relationship of these key sources of data and opinion?

PWN has felt for some time that the specific test period got cavalier treatment by the CCC. I made this very point at your hearing in November 2014 on the initial permit. Since slant wells are not in use anywhere in the world, how can CCC not absolutely insist on a valid test period? Not knowing what is a valid period, surely sophisticated professional attention is required. What is a valid test period? Will CCC opine on this? Will CCC prescribe a valid duration for the test period?

The only known subsurface intakes for desal have occurred in California – Dana Point and Sand City.

1) Dana Point results after 18 months of test slant well pumping are these: no conclusions on viability; some sand infiltration problems; and pumping efficiency declined from over 90% to about 55% over 18 months.

2) The data from the Sand City vertical subsurface wells for a small 300 acre foot/year plant shows actual pumping efficiency over 4 year of operation to be in serious decline:

From Sand City Public Works, calendar year:

  • 2011 96.8%
  • 2012 69.6%
  • 2013 64.8%
  • 2014 60.8%

From Monterey Peninsula Water Management District, water year

  • 2011 91.9%
  • 2012 80.7%
  • 2013 62.3%
  • 2014 59.5%

This data on Sand City tells a very negative tale about reliability, and therefore viability. Why does pumping efficiency with subsurface intake decline so significantly over a few years? Dana Point and Sand City data clearly make this point! Has the CCC considered this? This is why a valid test period is critical. Experience so far does not dictate a “full speed ahead” mentality. In fact it screams out for caution. And to be skeptical about any optimism about short term data. The telling will be in the testing, and in the duration, not the first data available.

Will CCC require a legitimate test period of two years or more? Remember, Cal Am originally proposed a two year test period. But with unexplained lower performance at Sand City, is two years adequate?

Every diagram example in all sources describe slant wells as penetrating far enough under the sea floor to extract water from beneath the sea floor. The intent is clear – to avoid aquifer interference, and perhaps to avoid related water rights claims. But the Cal Am test well does not penetrate the vertical line at the mean high tide line. It stops landward of that line. Would this “test well” meet your normal standard for a test of under sea floor intake? The fact that it did not extend under the sea floor area should raise questions about design or engineering?

Was the drilling length too risky or difficult? Was the drilling capacity limited in some way? Is this an issue for feasibility? Was the design under the patents too limiting? Should horizontal directional drilling still be an option? Are there more experiments that should take place? Did the insistence on the removable casings create engineering demands that were excessive? Could the guidelines from the State Water Board have established too high a level of outcome that was too expensive for success? The fact of a shorter test well length than intended (by the proponent, the patent holder and the public promotion) must get questioned regarding its use as a “test”?

Furthermore the plan of Cal Am to proceed directly from a short test period into a development permit for nine production wells makes a farce of all the publicity about the “test well” being a legitimate test well! The plan of Cal Am is based on assumptions, not tests. There are enough questions about long term performance reliability and cost acceptability that should ring alarm bells at the CCC, and elsewhere.

Working out the details and the costs of this experiment should not fall on the ratepayers. This is a state-sponsored requirement, and should have significant state funding. I doubt you have access to funding assistance. At least you might acknowledge the unfairness of the state, and the corporate utility, foisting this unproven and little scrutinized experiment on ratepayers.

The CCC, having jurisdiction over the efficacy of slant well impacts, and having a deep interest in the long term success of subsurface intakes, should have a particular interest in seeing that it is done right. This is too new for the CCC to feel comfort in self-interested promoters and contractors.

Whatever happened to the precautionary principle?

If there is to be a successful test, there must be conscientious and professional attention to the fact that slant wells have never been successfully constructed and become operational anywhere in the world.

Costs can become astronomical, and should not fall exclusively on local ratepayers. State resources must be made available, since it is a policy goal of several state agencies for subsurface intakes. And the facts of declining pumping efficiency should also raise alarms.

We sincerely hope you will take these issues into account during deliberations and analysis of Cal Am’s amended permit.

Respectfully,

 

George T. Riley
Managing Director
Public Water Now

Emailed to: tom.luster

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newsOpen letter to Sen. Bill Monning and Assemblyman Mark Stone

Re: Suggestions Regarding Changes to CPUC Composition and Process

 

Recently, I forwarded to each of you a copy of a letter that I wrote to Robert MacLean, president of California American Water Co. In that letter, I pointed out some of the serious issues that ratepayers have with the company, and I provided him some suggestions that, if adopted, could help both Cal Am and its Monterey Peninsula ratepayers.

However, there is another equation that, in my opinion, should be considered side-by-side with any analysis of Cal Am’s actions if one is to determine if there are fixes that could result in a future water supply for the Peninsula that would be reliable, affordable and acceptable from all regulatory standpoints. It involves the California Public Utilities Commission. I am sure you know of the problems that have surfaced recently with allegations of conflicts of interest and biases and the resulting great loss in the credibility of the commission and its system of regulating private utilities.

With respect to the CPUC and its relationship with Cal Am, the issues are more localized, but are every bit as concerning as the more global issues that have been making the news. The problem with the CPUC, as far as most Peninsula ratepayers will tell you, is that the agency tends to bend over backwards to approve rate increases for Cal Am, irrespective of certain facts that, on their face, would indicate the applications do not merit positive results for Cal Am.

In my letter to Mr. MacLean, I cite the San Clemente Dam rate case as a terrible example of how the commission disregarded the recommendation of its Division of Ratepayer Advocates, as well as the administrative law judge who actually heard the case, and voted instead for a recommended decision that, for all the world, looked like it was drafted by Cal Am itself.

So here is what I see. The CPUC and its process has several flaws. First, persons appointed as commissioners are not required to have any specific experience in areas that are critical to the making of decisions on complex issues that will come before them.

Second, ratepayers really have no agency or external group that has the power and authority to come to their aid when the commission has stepped over the line with respect to reasonableness and fairness. The Division of Ratepayers Advocates has a very competent and experienced staff, and they frequently analyze and point out many issues in rate cases that bear full attention. Unfortunately, they have no authority beyond making recommendations, and the full commission can accept or reject as it wishes, and it does.

Third, rate cases are most often heard in San Francisco, which does not provide significant access to and participation in the process for ordinary ratepayers. Most ratepayers are unable to participate as parties, which usually requires retention of legal counsel, time and travel costs to San Francisco and back to their homes. In addition, the three-minute rule, while I understand its adoption, works as a further limitation on the ability of most ratepayers to participate and have their serious concerns heard.

I am proposing a general outline of what would be a legislative, and regulatory fix for these issues, and am forwarding them to you in hopes you will give them serious consideration as to changes that should be pursued

In the State of Ohio, where my wife and I have a part-time home, a person appointed as a commissioner to the Public Utilities Commission must have experience in one or more of the following areas: economics, law, accounting, finance, natural and physical science, natural resources, or environmental studies. Presently, under California law, there are no such qualifications required and this should be changed.

An independent body, such as the Ohio Consumers Council, needs to be established, one that undertakes the same roles as the DRA, but one that has the ability to bring suit on behalf of ratepayers, not just one that can make recommendations that can be ignored. In Ohio, for example, the most comparable entity has a staff of about 15 professionals, including attorneys, analysts and public outreach specialists, and has an annual budget of $8.5 million.

If this option is not feasible, for whatever reason, I would recommend that the Commission, if voting to adopt a decision opposed by the DRA, must address each and every point of opposition expressed by the DRA.

With respect to access, I would recommend that a commissioner assigned to a rate case schedule several public meetings in a location that is most favorable for attendance by ratepayers potentially impacted by the outcome. The times would be also set reasonably to promote maximum attendance. In order to get around the three-minute rule, a process would be created whereby ratepayers could identify a limited number of representatives who would speak on behalf of those persons. Such named representatives would be identified to the CPUC and the sitting commissioner would grant such representatives up to 15 minutes to state their positions, plus reasonable time to respond to questions/comments that are raised. If time permitted, the commissioner could also allow individuals to speak, but they would be limited by the three-minute rule.

The ex parte rules currently in use by the CPUC probably present the most significant potential for abuse and the creation and continuation of the perception that regulated utilities have a path, hidden from view, to exert undue influence on the decisions of the commission. This is a sensitive subject, but recent disclosures surrounding the past chairman and his relationships with certain utilities strengthen the need for a close analysis and the implementation of changes that will bring the process more out in the open. If and when there would ever be an intent and agreement between a utility and a commissioner to abuse the system, the ratepayers who bear the brunt of such an action, under current ex parte rules, would have little or no access to protect themselves. So here are my suggestions.

1. Commissioners would not be allowed to meet privately with anyone representing a former employer or anyone with whom they had been associated with as a representative or consultant or anyone who had made contributions of more than $___ to any political campaigns engaged in by said commissioner.

2. In the event of any ex parte meetings, the commissioner shall be required to comply with the existing disclosure requirements and prepare a bullet summary of the key points that were discussed at the meeting for distribution to all parties to the case within three days. The petitioner shall agree to provide be cross-examined, under oath, with respect to the content and nature of the meeting if called for by any party to the case, and shall respond to all relevant questions that are not rejected for cause by the sitting ALJ.

My preference would be to ban all ex parte meetings in a rate case. In lieu of that, my preference would be that all communications between the parties and the commissioners be in writing and directly distributed or made available to all parties. A completely open process, while not infallible against those who want to circumvent it, still provides a stronger potential that behind-the-scenes communications will not be factors that wrongly influence the decisions of the commission in a rate case, where millions of dollars can be on the line.

This is not an indictment of the integrity of anyone. However, events of the past have led to a widely held belief that behind-the-scenes contacts have resulted in unfair results and have caused significant damage to the credibility of the CPUC.

It is clear to me that the CPUC needs to be reprogrammed in such a way that its deliberations and decisions are perceived as fact-based and fair and reasonable to both the utilities that they regulate and the public. Right now, that perception is almost entirely the opposite – that politics and back-door influences are involved, and, as a result, ratepayers cannot rely upon the agency to protect their interests.

In my career, I have drafted proposed regulations and legislation and would be pleased to provide you with a working draft, should you have any interest in pursuing this matter.I can be reached by email at wshood37@yahoo.com.

Hood is a retired lawyer and engineer and former executive director of the Association of Monterey Bay Area Governments.

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????Two items in the Pine Cone today could not help but pique my curiosity. Perhaps the Partisan readers can join me in asking the Mayors’ Authority and the Pine Cone a few questions to ask their interviewees the next time they discuss water projects with them:

1. Cal Am will now miss the August Coastal Commission meeting, and is shooting for September. Fair enough, but how does the conflict of interest investigation by the Public Utilities Commission enter into the discussion regarding restarting a well that relies upon audit results of the person being investigated?

2. Deep Water Desal has announced that it can have desalinated water produced for distribution by Fall 2017. They have not yet even started the EIR process, in fact, their public partner, the California Lands Commission, has not even started the process of obtaining a consultant. The Moss Landing Harbor District has been very clear that Deep Water’s plan to punch a hole under Highway 1 and under the Harbor District’s property is a non-starter. So, Deep Water, how do you plan such an aggressive schedule when you do not currently possess an intake option for your 25 MGD (25 million gallons per day) plant?

Steve Collins is an accountant and former chairman of the Monterey County Water Resources Agency board of directors. He helped lead the county’s efforts to develop a desalination plant in partnership with Cal Am and was prosecuted for a conflict of interest that he maintains was encouraged and approved by top county officials. He has worked as a consultant for Nader Agha, who is pursuing a separate desalination project.

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STATE HAS MADE CAL AM DESAL PROJECT A TEST CASE

OFFICIAL IN CHARGE OF EIR WAS PROJECT’S FIRST CHEERLEADER

TIME PRESSURE GIVES OFFICIALS EXCUSE TO CUT CORNERS

To hear some people tell it, one of the big problems facing Cal Am’s desalination project in Marina is criticism from those concerned about the environmental and economic impacts. Project supporters go so far as to blame the critics for the various delays that have forced repeated changes in the pre-construction timetable.

But after following the process closely for a decade now, after being counseled interminably by project proponents and reading environmental impact reports, feasibility studies and all manner of other paperwork, I have come to the opposite conclusion. I believe one of the venture’s biggest problems is that it has too much support. By that, I mean that agencies that should be honestly evaluating the project are advocating for it instead, leading to lapses in judgment and errors in execution. Peninsula business interests, meanwhile, panicked by the threat of water cutbacks, have taken a full-speed-ahead posture that could help produce a flawed and incredibly expensive answer to a problem that has other solutions.

When a previous incarnation of the desal project fell apart, it wasn’t because naysayers had put up too many obstacles. Key factors in its demise were a politically awkward management structure and the fact that money was being passed under the table in an effort to advance the project, not destroy it.

Now, proponents and participants in the project have proved again to be their own worst enemies, first by making overly optimistic projections about the composition of the water to be desalted and by ignoring glaring conflicts of interest built into the process of testing the water at the plant site north of Marina.

In defense, those in charge cite the heavy deadline pressure, with the state threatening to force untenable cuts in the Peninsula’s use of Carmel River water. They say time is so tight that they must push on or else the Peninsula’s economic well being will be in grave danger. Such thinking plays right into the hands of Cal Am, of course, which makes its money no matter how many times it has to start over.

When I was opinion page editor of the Monterey Herald, we came out in favor of desalination because of the shortage of practical alternatives. We were one of the first entities in the community to voice support. I now feel that the alternatives are becoming more attractive and that the project in its current configuration presents even graver danger to the well being of Cal Am customers on the Peninsula, who will be forced to pay for it no matter how expensive it becomes—even if it never produces a drop of drinkable water.

PENINSULA PLANT COULD BE A MODEL, FOR A PRICE

Creating additional pressures and costs, the state is using the project to test its preferred water-intake technology with minimal compensation to the Peninsula. As it stands, Peninsula water customers will be required to cover millions and millions of dollars in expenses regardless of whether the test is a success. Remember when Cal Am and its supporters were breathlessly arguing that testing of the intake method needed to begin as soon as possible, and that anyone who said otherwise was an obstructionist? That testing is on hold now for reasons that informed and objective observers could have seen coming, and the money meter continues to spin.

Carmel Mayor Jason Burnett, an almost full-time participant in the desalination process as chair of the Peninsula mayors’ water authority, agrees that the financial burden created by the experiment should be shared by state taxpayers, and he indicated he is working on it.

Tap drippingEven now, while the testing and environmental impact review are both stalled, Cal Am is going after yet another set of rate increases to help pay for the plant that may never be built and to offset income it has lost because its Peninsula customers have done such a good job of conserving water. Residential customers, who already consume and conserve some of the most expensive water in the state, would see rates increase by 29 percent under a request Cal Am filed last week with the Public Utilities Commission. At the same time, businesses would see a rate reduction of some 14 percent even though some business interests already pay discounted rates in what amounts to a reward for supporting the desal project.

Cal Am’s ability to obtain rate increase after increase from the PUC helps explain why the utility is comfortable doing whatever the state wants, no matter how illogical or expensive. In the cost-plus world of utility accounting, bigger expenses mean bigger profits.

PENINSULA IS A DESAL GUINEA PIG IN A COSTLY EXPERIMENT

Few people quarrel with the need for a desalination plant or some other means of stretching the Peninsula’s water supply. We have nearly destroyed the Carmel River, our primary water source. State officials were correct to issue a cease and desist order that will require Cal Am to greatly reduce pumping from the river in stages, which local officials are desperately attempting to postpone until the plant comes online.

Compounding the challenge significantly, the project has become an important test case that will help decide what type of water intake should be employed by other desalination facilities now on the drawing boards up and down the state.

They make it sound super complicated. It isn’t. It is worth your attention if only because it will help you understand the latest conflict of interest issue that has thrown a wrench into the process.

The easiest and least expensive intake is known as open ocean, which means pumping water straight from the ocean. The problem is that all manner of marine life is pumped into the plant along with the salty water.

Environmental groups and the various regulatory agencies greatly prefer the idea of subsurface intake, which involves pumping from below the ocean floor, using the sand and other sediment as filters to protect aquatic life. In the best case from an environmental standpoint, the wells would be drilled some distance from the shore and slanted so that their intakes would extend below the ocean floor.

Unfortunately, there is some guesswork involved in deciding exactly where to drill the so-called slant wells and there are few successful examples.  Cal Am’s project presents the state with one of the largest and most meaningful tests of the slant well technology so far.

Racks of filters in a desalination plantAlso unfortunately, not everyone involved in the project has the same agenda, and the state apparently ignored some well-established principles of how public works projects should be organized and assessed.

Perhaps the best way to illustrate that is to examine the shifting roles of the man now in charge of preparing the all-important environmental impact report for the current project. That’s Eric Zigas of the San Francisco firm of Environmental Science Associates.

Zigas may be a familiar name to those who have followed the desalination follies from the start. He also one of the architects of the previous incarnation of the desalination project–the version that devolved into a web of litigation. Before that he was a key part of the Public Utilities Commission team that decided desalination was the best solution to the Peninsula’s water problem.

PROJECT’S CHIEF ENVIRONMENTAL MONITOR STARTED WITH A VERY DIFFERENT ROLE

The current desalination proposal grew out of what became known as Plan B after plans for a dam on the Carmel River fell apart. The Legislature put the Public Utilities Commission in charge of finding an alternative and Zigas was hired to help draft the plan. He teamed with officials at UC Santa Cruz and various state and local agencies to help craft an ambitious scheme for a desalination plant at Moss Landing with a long list of environmental amenities such as a garbage-powered energy supply. The PUC then assigned Zigas to tout the plan to various Peninsula business groups, service clubs, news outlets and others. He effectively helped sell the community on desalination.

But for various reasons, most of the bells and whistles were later removed from the plan, and the project became a cumbersome joint venture between Cal Am, Monterey County and the Marina Coast Water District. Despite Zigas’ earlier role as the official cheerleader for the project, his firm was hired by the PUC to prepare the environmental impact report on that proposal before other factors caused it to be shelved.

Today, Zigas leads the environmental analysis of the process he helped initiate. Those who have worked with him say his experience on the Peninsula gives him unmatched knowledge of the issues involved, which are many. The project is complex, including a plant processing countless gallons of sea water, disposing tons of brine, and dispatching fresh water through a new network of pipelines. The expectation, of course, is that the analysis will be scientific and unbiased. A draft of the EIR is now circulating and the technical community now examining the document will determine whether has Zigas successfully switched hats. Considering how much controversy the process has created, the final EIR is very likely to be tested in court.

(When the first draft of the official environmental impact report incorrectly concluded that there were no functional agricultural wells near the plant site, Zigas briefly defended his team’s work before adopting a no-comment stance. )

eric-zigas

Eric Zigas

Zigas isn’t talking to the press, at least not to the Partisan, and he hasn’t publicly addressed his role in the latest delays.

The EIR process has been pushed back a few months because of a conflict created by the involvement of a firm that holds a patent on the slant-well technology. To help assess the test well, Zigas’ firm had brought in a company called Geoscience, headed by noted hydrologist Dennis Williams. In addition to the potential conflict presented by his patent, Williams also was working for Cal Am on the same project.

The PUC’s project manager, Andrew Barnsdale, was reassigned last week because of the revelations, which were brought to light by project critics. At the same time, a PUC administrative law judge, Gary Weatherford, issued a lengthy order requiring ESA and Cal Am to provide the contracts of everyone involved and to explain the degree to which the testing process may have been tainted.

It should not be forgotten that the Geoscience situation surfaced after the Coastal Commission suspended pumping at the test site last month because the well apparently was taking in more fresh water than anticipated. After the testing began, the groundwater table started dropping, which Cal Am blamed on agricultural pumping though it had insisted previously that there was no agricultural pumping in the area. Critics of the project had nothing to do with that.

GEORGE AND JASON LOOK AT PROJECT FROM DIFFERENT PERSPECRTIVES

George Riley has followed the project’s process as closely as anyone, and has a unique perspective. While he is an activist and head of a group that advocates public takeover of Cal Am, he also has been an accredited participant in the PUC processes as well as a member of a technical advisory committee advising Peninsula mayors on desal matters.

He agrees that the process has been marred by inter-connections.

“A quiet alliance of advocates, appearing as specialists, has emerged,” he said by email. “All are also quietly supported by the ruling state agencies. The ruling water elites at the state level have a greater role here, and has not been discussed.  And Monterey Peninsula as guinea pig is useful for them.”

Riley said Zigas and Environmental Science Associates do deserve credit, both for helping get the well testing process on track after Cal Am’s dawdling had worsened the time crunch and for pushing for well testing data to be included in the environmental impact report. The idea, Riley said, is for the final EIR to become “the vehicle for tooting the horns for slant wells” strongly favored by the various state agencies.

In Riley’s view, the fumbles that have marred the process would not be so worrisome if the state was helping to pay for the slant well testing and if the state would do more to encourage competing proposals that possibly could address the Peninsula’s water needs more quickly and less expensively.

Burnett, in a telephone interview Saturday, said he supports the PUC’s decision to call a brief timeout over the patent issue and examine where things went wrong with the test well team. He said it is important now to view Geoscience as a “proponent” rather than an arms-length analyst.

But Burnett disagrees that the process is fundamentally flawed or that the project’s management structure should be overhauled. He said he has great faith in Weatherford, the administrative law judge who is reviewing the testing conflicts.

(Burnett, by the way, has taken quite a beating politically in some quarters for his role as a leading advocate for such a controversial project. His detractors should be reminded that he helped  create a financing package for the plant that should save ratepayers millions of dollars over time and managed almost single-handedly to impose some level of public oversight over the project despite serious resistance from Cal Am.)

Antique water fountain, detail of a source for drinking water, drinking waterSUCCESS SHOULDN’T REQUIRE SETTLING FOR SECOND-RATE

From where I sit, it seems clear that the PUC needs to do more than study the known conflicts and then continue on the same course if this project is to be salvaged. Soonest, it needs to join with local politicians and work with the State Water Resources Control Board to eliminate the artificial pressure caused by the cease-and-desist order deadlines before they result in a hopelessly flawed and expensive project.

Barnsdale, the now departed PUC project manager, is a bureaucrat, a permit processor, not a construction or desalination expert. His replacement needs to be someone with real world experience rather than a purely regulatory background.

The PUC also needs to do what it can to support alternative measures such as wastewater recycling and stepped up conservation and to take a closer look at the competing proposals, the Moss Landing plans being pursued by Nader Agha and the DeepWater group, to see if they could effectively supplant some or all of the Cal Am project.

Obviously, the PUC also needs to take a long look at Cal Am’s rate structure for the Peninsula and drill into the company’s argument for two classes of rates, one set for the relatively helpless residential customers and a discounted set for the more politically powerful business class.

Finally, Cal Am and its supporters need to stop attempting to vilify anyone who raises questions about the process. All major public works projects encounter problems and this one is  more complex than most. Clearly, outside scrutiny will make it stronger, not weaker. As a community, there is strong agreement that we are obligated to stop abusing the Carmel River and unless someone works some magic and soon, we seem to be stuck with desal as the solution. That does not mean, however, that we must accept a project that carries a bloated pricetag and creates as many problems as it solves.

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See update at end. Also new, PUC Judge Gary Weatherford’s order detailing true information he wants from Cal Am and others about the latest conflict of interest.

 

There were some nice surprises in Jim Johnson’s story today in the Monterey Herald. The subject was desalination but it was not about delays or cost increases, at least not directly.

Johnson reported that Public Utilities Commission project manager Andrew Barnsdale is being relieved from the responsibility of overseeing the Cal Am desal project on the Peninsula. There were two surprises right there.

One was that there was a specific someone at the PUC who was responsible for the desal project. The impression had been created long ago that no one was in charge unless it was Cal Am. Whenever anything big happened at the PUC level, it always seemed to be the work of an administrative law judge who was allowed no contact with anyone except large law firms. Some of those administrative law judges seem pretty bright, but they’re pretty much limited to ruling on matters put in front of them by others who may or may not qualify for that distinction.

So someone named Barnsdale was in charge? Good to know. His name had come up along the way, but it hadn’t stirred much interest in the growing community of desal watchers locally for several reasons. First, his background is mostly in environmental law, electricity and permitting issues, not water or construction. Second, he had responsibilities for other significant projects around the state. Apparently the PUC thinks that overseeing an extremely important and tremendously challenging $400 million-plus desal project is a part-time job for someone without desal experience.

Dollar bills close-up - Money keeps silentAlso under surprises but in the “good surprises” category was that whoever Barnsdale reports to took action upon learning of a conflict of interest situation. It involves testing of the well technology that Cal Am intends to use. It turned out that the testing was essentially being carried out by one fellow who was being paid by most everyone involved in the effort, and who stood to make more money the longer the technology seemed to be working. Among those he was working for was the PUC and Cal Am. And the company preparing the environmental impact report on the project.

There are a couple of surprises contained in the preceding paragraph. No, not the conflict of interest part. The conflicts were apparent months ago to just about everyone involved, everyone except the PUC apparently. The surprises are that the PUC either didn’t know or pretended not to know something that should have been obvious to anyone with a passing interest in the subject, that it admitted to recognizing the problem eventually and, probably most surprising of all, that it did something about it.

UPDATE: Following the original post of this article, Monterey water activist George Riley weighed in with a comment, see below, strongly supportive of Barnsdale. Considering George’s superior knowledge of this project, the process and the players, this very strongly suggests that Barnsdale is being scapegoated. Stay turned for more on this.

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Cal Am’s latest desal delay is its own damned fault

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For the past couple of years now, California American Water and its various partners have told us that time is of the essence, that its plans for a $400 million-plus desalination plant must proceed at all costs. The threat of a state-ordered cutback on water use looms large, especially over the hospitality industry, the Peninsula’s largest economic driver.

So when environmentalists have raised concerns about the impact of drilling giant wells under the beach, when those of a technical bent worried aloud about the integrity of the pre-construction testing process and the potential impact on groundwater near the plant site, when people concerned about the high cost of mistakes pointed out a glaring conflict of interest among the project team, they were all dismissed as obstructionists.

“They” are trying to stop the project, we were told, though “they” were never really identified. (The working definition of the so-called obsctructionists might be anyone who isn’t being paid to advance the project or doesn’t stand to receive a direct financial benefit.)

Those arguing that state environmental laws should be not be ignored for the convenience of the engineers were called tree huggers or worse, shills for potentially competing projects. Though they have found themselves in an emergency of their own making, Cal Am and its bedfellows argue that there have been too many delays already and rules are meant to be broken if it is in the interest of speed and commerce.

And now comes another significant setback for the project. Ruling Extending EIR Deadline for MPWSP Whose fault? Those damned obstructionists? Not hardly.An administrative law judge for the Public Utilities Commission ruled Thursday that the bureaucratic timetable must be set back three months because one of the key figures in the well-testing process is wearing too many hats. There are things to be sorted out, said an exasperated judge, Gary Weatherford.

Here is today’s Herald story on the ruling.

It seems that Dennis Williams of Geoscience is working for just about everyone involved in the well testing, including both Cal Am and the PUC, and he also holds a patent on the technology being tested. In other words, he was being paid by the PUC and the company preparing the environmental impact report on the project to help test Cal Am’s test wells of his design while also being paid by Cal Am. What could possibly go wrong?

So now expect to be told that this is an unnecessary delay caused by “those who would destroy the project.” But the truth is that this is the fault of those making the decisions on behalf of Cal Am and the Public Utilities Commission. This is not the handiwork of obstructionists. This is another breakdown in the procedure, a result of arrogance.

True, some of those who aren’t big fans of the project did notice the conflict and pointed it out but the powers that be on this project already knew all about it. If they say they didn’t, they will either be lying or admitting to grotesque incompetence. Google Dennis Williams and Geoscience and see how long it takes for you to spot the problem and say, “Oh, my.”

Williams is highly qualified for the work involved and it is entirely possible that he can segregate his functions properly and provide accurate assessments, at least according to his own standards. But that should have been discussed openly by the various parties – including the public – right from the start. Not now, after the media demonstrated that the PUC’s experts couldn’t even find a private well near the test site. Not now, after unexpected decline in groundwater in the area suggests the test well isn’t working as it is supposed to. Now now, after Cal Am’s customers have been put on the hook for some $10 million in testing costs, costs that will come straight out of customers’ pockets no matter how any of this turns out.

It could be that Williams was the best choice for the job and should have been hired. But doing that right would have required putting his various entanglements on the record, and you know what can happen when the public knows too much.

Weatherford’s ruling comes just a week at the Coastal Commission ruled that Cal Am needs to do some more work on its well testing program, which begs the question of whether Cal Am could have accomplished more early on by refining its testing plan rather than scratching and clawing to fast track it through the regulatory processes in the first place.

It could be that under current standards of public works construction, it isn’t possible for a project to be built without compromises of quality, design and process. Maybe there is corruption and self-dealing in every venture beyond some certain financial threshold. Maybe it’s $100 million. Maybe it’s whatever Cal Am’s budget calls for.

From Cal Am’s perspective, Tom Moore fits right into the obstructionist category. He’s on the board of the Marina Coast Water District, which once was a partner in Cal Am’s desal efforts, a partnership that fell apart spectacularly when it came out that a former county water official, Steve Collins, was being paid under the table for consulting work on the project. Now there is litigation and Monterey County and Cal Am and Moore’s district are trying to make each look bad and, for the most part, succeeding.

But Moore is also well positioned to comment on the swirl that the desal venture has become. Here’s his take.

“Given the history of the Regional Desalination Project and what happened to Steve Collins, logic would dictate that Cal Am and the CPUC would carefully vet ALL of their consultants and contractors to ensure there wouldn’t be even the slightest whiff of the appearance of a conflict of interest.  And logic would also dictate that any consultant or contractor thinking about working for either the CPUC or Cal Am on the Monterey Peninsula Water Supply Project, or both in this case, would consult with competent attorneys and disclose, disclose, disclose in order to stay the hell away from even a remote possibility of a conflict of interest.  Unfortunately, it seems logic was not at work here.

“What does appear to be in abundance in this entire debacle is an appalling belief:  that when it comes to making more money for your shareholders and yourself, the ends always justify the means.  The withholding of critical information from customers and the public, the concealment of conflicts of interest, twisting the truth and even outright lying seem to be coin of the realm for the folks who hold this appalling belief.  It’s a very unfortunate commentary about private commerce today that $20 million $30 million will buy a lot of this sort of dishonesty.”

As it stands, the process leading to a possible desalination plant has become littered with thorns. Supporters of this project feel they must barrel through it all and demonstrate certitude  even though they has never built such a plant or maneuvered through such a process. They apparently feel that to stop and listen to anyone who isn’t on their desal team might be seen as a sign of weakness, so they choose to ignore all the noise from the bleachers. “They’re just trying to stop the project.”

And while that might be true for a few, many, many who have been watching and weighing in on the desal project for a decade now want only for the project to be completed as efficiently and cleanly as possible. And, just in case, they want officials to continue considering alternative projects that likely would not be as expensive or environmentally intrusive. There are many who don’t trust Cal Am and fear that special deals with the hospitality industry will leave everyone else paying exorbitant amounts for water. But they also understand that the river needs to be protected and an additional water supply is required. What they want is for Cal Am and the PUC to do a better job.

Cal Am averted a public takeover effort partly by convincing the public that it can do a better job than a public agency. Since then, the company has have presented no evidence of that. If there was generalized trust that Cal Am and its boosters were capable of getting it done on their own, and keeping costs at least somewhat under control,  the noise surely would die down. But what has gone down instead is the trust level, and there may be no end in sight unless Cal Am et al change their ways.

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