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HALL MONTEREY, CALIFORNIA Directors Present: Directors Absent: Staff Present: ROLL CALL President Della Sala called the meeting to order at 7:05 p.m. All members were present with the exception of Mayor Kampe, and Alternate Casey Lucius attended in his absence. PLEDGE OF ALLEGIANCE REPORTS FROM BOARD DIRECTORS AND STAFF President Della Sala invited reports from Directors and Staff. Director Burnett reported on the possible change of location of the Monterey Peninsula Water Supply Project (MPWSP) test well to an alternate location on the Semex property. Conversations are continuing and are progressing positivity. He indicated that Congressman Farr submitted a letter to the U.S. Fish and Wildlife Service requesting assistance in identification of an alternate, less controversial site. President Della Sala reported regarding the Governance Committee special meeting on May 17, 2013 which adopted draft criteria for the Ground Water Replenishment (GWR) project to be recommended for the June 12, 2013 California Public Utilities Commission (CPUC) GWR workshop. The Committee adopted the guidelines recommended by the Authority. He then reported that the Cal Poly design teams made outstanding presentations to the Governance committee and went above and beyond in their level of detail and engineering. Many efficiencies were designed into the facility, including a net zero energy design consumption. Design was to be LEED-like without the cost for certification for Leadership in Energy Efficiency and Design (LEED). Both plans were designed for future expansion. The two teams were then requested to break out the most expensive part of the development to determine if the risk/reward benefit was there and to determine how expensive it would be to maintain the energy efficient building. Executive Director Reichmuth reported that all previously video recorded meetings are now linked on the website www.mprwa.org. He also reminded the Directors that May 31, 2013 would be his last day working as the Executive Director for the Authority and that Jim Cullem will become the new Executive Director. Mr. Reichmuth then requested continuing item three to the next regular meeting as there was no representative from Cal Am to provide an update on the MPWSP. On a motion by Director Edelen, seconded by Director Lucius, and carried by the following vote, the Monterey Peninsula Regional Water Authority approved continuing agenda Item three to the next meeting. AYES: 4 DIRECTORS: Burnett, Edelen, Pendergrass, Lucius, Della Sala Burnett, Edelen, Pendergrass, Alternate Member Lucius, Della Sala Kampe Executive Director, Legal Counsel, Clerk
MPRWA Minutes NOES: ABSENT: ABSTAIN: RECUSED: 0 3 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: None Kampe None None
Thursday, May 23, 2013
PUBLIC COMMENTS President Della Sala invited comments from the public for items not on the agenda. Nelson Vega questioned what the process would be if the Cal Am project was not successful and questioned if the Authority’s position is to support general plan build out for the EIR process. With no additional requests to speak President Della Sala closed public comment and responded to Mr. Vega’s question by saying the Authority requested the CPUC to mandate a full EIR based on a full general plan build out. APPROVAL OF MINUTES 1. May 9, 2013 Action: Approved On a motion by Director Pendergrass, seconded by Director Rubio, and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the minutes of May 9, 2013: AYES: NOES: ABSENT: ABSTAIN: RECUSED: 4 0 3 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: Burnett, Edelen, Pendergrass, Lucius, Della Sala None Kampe None None
AGENDA ITEMS 2. Receive Report and Provide Guidance Regarding Settlement Discussions and Preparation for June 12, 2013 California Public Utilities Commission Settlement Conference (Burnett) Action: Received Report and Discussed Director Burnett reported on this item and indicated that because of the adopted position statement, many of the things that will take place in the confidential settlement discussions will be less challenging. The goal of the Authority has been to maintain transparency. He noted that if issues due arise that need further clarification, they will be returned to the Authority for clarification or to refine elements of the position statement. Director Burnett reported the timeline for the final settlement hearings as listed below: • • • June 14, 2013 - Final settlement agreements submitted June 12, 2013 - GWR workshop June 28, 2013 - GWR Settlement agreements
Mr. Burnett then reported that the criteria approved by the Authority, Governance Committee and the Monterey Peninsula Water Management District for the June 12, 2013 workshop was rejected by the CPUC and returned requesting revisions to be more objective in order to satisfy the CPUC rules under the Tier 2 letter. Director Burnett expressed concern that more objective criteria will mean there will be less discretion and judgment that can be exercised on behalf of the community. He then answered questions of the board: Monterey Peninsula Regional Water Authority Regular Meeting Minutes - Thursday, May 23, 2013 2
Thursday, May 23, 2013
President Della Sala opened the item to public comment. Nelson Vega questioned why every document is proposing the 6.4 MGD, and not the 9.6 MGD plant. His assumption is that proposal should be vying for a larger plant if the GWR comes in that it could be cost effective, and efficient, then we go for the smaller plant plus GWR. He also questioned the process going forward with the settlement conference. Having no more requests to speak president Della Sala closed public comment and responded that the Authority is in support of a portfolio approach, and Cal Am is progressing as a portfolio, but going forward with a study for the 9.6 MGD in the event GWR does not come to fruition. 3. Receive Status Update for Compliance with Authority Adopted Conditions for the Monterey Peninsula Water Supply Project (Bowie) Action: Continued to the Next Regular Meeting Receive Report and Provide Direction Regarding Term Sheet for Power Purchase Agreement by Cal Am from Monterey Regional Waste Management District (Reichmuth) Action: Received Report and Discussed Executive Director Reichmuth reported that he has been facilitating the development a power purchase agreement between the Monterey Regional Waste Management District and the MPWSP. He indicated that a committee has been formed and is in process of developing a draft term sheet. He anticipates that for every .01 per KWH that would be saved would equate to approximately $480 in cost savings per day, but the real cost savings would be with the elimination of the transmission costs. Another issue requiring discussion would be the renewable energy credit ownership, or RECs as they hold monetary as well as public relationship benefits. Mr. Reichmuth then answered questions of the Directors. Director Rubio questioned if there was an issue of a public board selling energy to a public agency. Director Edelen reminded the directors that the priorities are to produce the water at the lowest possible rate. If we can produce them at an environmentally friendly ways as long as it does not increase the cost of the project. President Della Sala opened the item to public comment and had no requests to speak. 5. Receive Report and Provide Direction on Draft Request for Proposals for Design-Build Services for Monterey Peninsula Water Supply Project Action: Received Report and Provided Direction for Recommended Changes Director Burnett presented the report including discussion of the report prepared by SPI Consultants regarding the Draft Request for Proposal. He noted that within the Governance Committee agreement, any contracts over $1 million are required to go before the Governance Committee for review and recommendations. The turnaround time is 10 days to avoid delay of the process. This agenda item is to allow the Authority to make recommendations for Director Burnett to report to the Governance Committee. The RFP will be released to the public on June 17, 2013 and responses are due in September 2013. Director Burnett then discussed the items the governance committee and the TAC discussed.
Monterey Peninsula Regional Water Authority Regular Meeting Minutes - Thursday, May 23, 2013 3
Thursday, May 23, 2013
1) Balance of Risk: Risk is shouldered more for design build firms over traditional bids. However, if too much risk is assigned to the Design-Build firm, the results will be more costly bids. 2) Responses should be evaluated for both smaller and larger size facilities, should be weighted equally, and should be evaluated on both construction and operations. The TAC recommends costs be evaluated over a 30 year life review. 3) Approach to evaluation criteria - 40% based on technical merits and 60% on the business terms of the proposal. Basic thinking, less weight given to technical and teams, all teams have been prequalified so any team should be able to deliver the project. 4) Concern that the RFP is too detailed, rather than leaving it to creative design. The TAC believes we should encourage more innovation and creativity on behalf of the Design. would expect all to bid on base design, for apples/apples comparison, given how to factor in scoring 5) Provisions for penalties if projects are not completed on time, but no bonus for completing on time or early. TAC feels a positive encouragement is important. 6) Binding arbitration vs. a court process - unless we want to take a position, the lawyers will negotiate this and bring back a recommendation. 7) Due to higher than normal inversion levels in our local environment designs must be robust against corrosion. The Directors discussed the merits of the presented recommendations. Director Rubio spoke to the concept of penalties saying it was common business practices of non performance. He then spoke to the idea of creativity and that it comes down to a value judgment and could be difficult to evaluate. He suggested holding the bid price for over a year is unusual and somewhat unreasonable. Executive Director Reichmuth indicated that municipal contracts are usually 90 days for bid price but to the bid value and the time for the project, one year is not unreasonable. President Della Sala opened the item to public comment. Nelson Vega questioned if there was any value with requesting a specific plan RFP rather than a creative design, as creativity and unknown equals risk. Having no more requests to speak, President Closed public comment. Mr. Reichmuth agreed with Mr. Vega's comments and went on to discuss the risk burden differences with a design build project and that it is appropriate in this environment to take advantage of the latest technologies and proprietary equipment that can be brought and delivered at a lower price. Equally important, with a design-build contract, if there is a design error that leads to a contract change, in a design-build environment, the design-build firm would be responsible to remedy. President Della Sala questioned the Director’s consensus with the recommendations provided by the TAC and the Directors agreed to all recommendations. 6. Discuss and Provide Policy Direction Regarding Support of New Water Service Connection Fees (Burnett, Stoldt) Action: Discussed and Approved Consideration of a Connection Charge for New Users
Monterey Peninsula Regional Water Authority Regular Meeting Minutes - Thursday, May 23, 2013 4
Thursday, May 23, 2013
Director Burnett discussed that when the desalination facility is operational, ratepayers will be billed up front for this project, paying thorough surcharge two. There is a settlement agreement in process regarding the failed regional project and costs being incurred to bring a new facility operational. If a new water user begins service any time after the project is completed, there would be no obligation to pay any of the fees current users are paying. A fairness argument can be made that there should be a mechanism that new rate payers share the cost. Director Burnett suggested that a connection fee be put in place to account for this issue and is asking if the Authority is in support of such a connection fee. Director Burnett then answered questions from the Directors. Director Pendergrass expressed concern and indicated this process is a balancing act and that he prefers to see Cal Am’s rate proposal to the CPUC prior to deciding. Director Edelen spoke to the process of how to determine the applicable charge so that everyone is required to contribute equally but he indicated he is in favor of the idea of a connection charge. Director Rubio expressed concern that too many fees will stifle the economic vitality of the community by discouraging development. He supports the idea with caution. Alternate Lucius questioned the duplication of fees from multiple agencies to which President Della Sala explained the nomenclature of "connection fee" from other regional water projects. President Della Sala opened the item to public comment. City Manager John Dunn expressed understanding for the logic of the fee, but communicated to the Authority that Seaside customers already have an existing connection feel to Cal Am as well as a water allocation fee imposed by the MPWMD. He urged reconsideration for the potential of three fees to Seaside customers and instead to find an integrated approach. The then urged extra consideration for affordability indicating if the fees are too high it defeats the purpose of this project. Doug Wilhelm spoke to the comment that some cities have more lots of record for general plan build out than others and reminded the Directors that there is a surcharge already in place for current rate payers. Mr. Wilhelm then questioned how the money would be returned to the ratepayers. With no more requests to speak, President Della Sala closed public comment. Director Burnett agreed with Mr. Wilhelm and indicated it would be used to lower the rate for all water users. The magnitude of that reduction would depend on the number of connection fees. President Della Sala identified that this policy is a way to reduce the cost to the project to the ratepayers and the amount of charge is still to be determined. In principle, he asked if the Authority supported this position. Director Rubio questioned if it was a new fee in addition to existing fees and expressed resistance to agree without knowing what that fee will be, but supported the idea that a connection charge for new users as a way to charge a prorated share. On a motion by Director Rubio seconded by Director Lucius and carried by the following vote, the Monterey Peninsula Regional Water Authority approve the concept of a new water service connection fee with the reservation of seeing further information and study to refund the connection fee costs for possible integration AYES: NOES: ABSENT: ABSTAIN: RECUSED: 7. 4 0 3 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: Burnett, Edelen, Pendergrass, Lucius, Della Sala None Kampe None None
Provide Further Direction and Refinement Regarding Authority Policy Position with Respect to the Significant Contribution of Public Funds Monterey Peninsula Regional Water Authority Regular Meeting Minutes - Thursday, May 23, 2013 5
MPRWA Minutes Action: Discussed and Provided Direction
Thursday, May 23, 2013
Director Burnett reported on the item and requested clarification for the Authority position of what "significant" contribution of funds would qualify as. He clarified that a couple of variables need to be accounted for first, the size of the facility and second, most of the cost numbers we focus on are the high end cost numbers. Director Burnett answered questions from the Directors. Director Rubio suggested using the guideline of 25%of the total cost for the public contribution. Director Pendergrass spoke to the issue of public ownership and Alternate Director Lucious questioned what that means for each of the rate payers. Director Burnett responded that cost to the individual rate payer would depend on interest rates years from now. If the Monterey Peninsula Water Management District’s interest rate savings calculations associated with securitization and rate reduction bond are accurate, total savings on $100 million over a 30 year period is $224 million dollars. Over a 30 year period it's about a $1,000 per household. President Della Sala opened the item for public comment. Doug Wilhelm spoke indicating that Cal Am has over 42,000 hook ups and based on his own calculations of surcharge two, it would cost an average homeowner $2,000 for the start up of the plant. Pacific Grove City Manager Tom Frutchey spoke indicating that for every $1,000 savings per person, assuming $100 per month, it's a 1% savings. Having no more requests to speak, President Della Sala Closed public comment and brought the discussion back to the board. Director Burnett summed up the two basic ways of reducing Cal Am's equity: 1) rate reduction securitization and 2) surcharge two. With respect to surcharge 2, if we are successful with 1, the revenue requirement will be less because we will be saving interest charges and if you set surcharge two equal to the revenue requirement, so you don't have rate shock but a gradual increase. Director Pendergrass expressed concern that Cal Am is not in support of this strategy as they have expressed opposition to this before. President Della Sala indicated that earmarking a percentage is not perfect but a range could cover all bases. On a motion by Director Rubio seconded by Director Edelen and carried by the following vote, the Monterey Peninsula Regional Water Authority approved the refinement of the previously adopted position regarding the item “significant contribution of public funds” to add the definition that Cal Am must accept the contribution of public funds of approximately 50% of the cost of the project to include both surcharge two and the rate reduction bonds to count toward the public contribution of 50%. AYES: NOES: ABSENT: ABSTAIN: RECUSED: 4 0 3 0 0 DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: DIRECTORS: Burnett, Edelen, Pendergrass, Lucius, Della Sala None Kampe None None
Monterey Peninsula Regional Water Authority Regular Meeting Minutes - Thursday, May 23, 2013 6
Thursday, May 23, 2013
With no further business to come before the Authority, President Della Sala adjourned the meeting at p.m. ATTEST:
Lesley Milton, Clerk of the Authority
Monterey Peninsula Regional Water Authority Regular Meeting Minutes - Thursday, May 23, 2013 7
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