MPRWA Final Report - Dec. 2012 by mcherald

VIEWS: 418 PAGES: 84

									  Evaluation of Seawater Desalination Projects


                   Final Report
                 December 2012


                  prepared for:

Monterey Peninsula Regional Water Authority




                        by:



              Separation Processes, Inc.

                         and

                Kris Helm Consulting
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                                                                                   TABLE OF CONTENTS




                                                                       CONTENTS



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1!       &/%+01$#%&0/!......................................................................................................................................!1"1!
2!       3+04!#%!($))*+&!(!............................................................................................................................!2"1!
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     1-:! !%#!4%(!*#((!4+05,0;!8!*49! ------------------------------------------------------------------------------------------------------------------------!1"<!
                                     -
3!       3+04!#%!6$/#%&0/!...............................................................................................................................!3"1!
     :-.! &+4,/#"0,+!+*%",&+0!7+'%"!8&+4"+*9!------------------------------------------------------------------------------------------------------------!:".!
        3.1.1! Project!Purpose!..................................................................................................................................!3"1!
        3.1.2! Customers!Identified!..........................................................................................................................!3"1!
        3.1.3! Adequacy!of!Treatment!Approach!.....................................................................................................!3"1!
        3.1.4! Residuals!Handling!.............................................................................................................................!3"4!
        3.1.5! Feed!Water!Characterization!.............................................................................................................!3"4!
        3.1.6! Quality!of!Project!Information!...........................................................................................................!3"4!
        3.1.7! Omissions!or!Fatal!Flaws!...................................................................................................................!3"5!
     :-1! 5%%!7+'%"!5%(+4!85759!------------------------------------------------------------------------------------------------------------------------------!:"<!
        3.2.1! Project!Purpose!..................................................................................................................................!3"6!
        3.2.2! Customers!Identified!..........................................................................................................................!3"6!
        3.2.3! Adequacy!of!Treatment!Approach!.....................................................................................................!3"6!
        3.2.4! Residuals!Handling!.............................................................................................................................!3"8!
        3.2.5! Feed!Water!Characterization!.............................................................................................................!3"8!
        3.2.6! Quality!of!Project!Information!...........................................................................................................!3"8!
        3.2.7! Omissions!or!Fatal!Flaws!...................................................................................................................!3"9!
     :-:! !%#!4%(!*#((!4+05,0;!8!*49!------------------------------------------------------------------------------------------------------------------------!:"=!
        3.3.1! Project!Purpose!..................................................................................................................................!3"9!
        3.3.2! Customers!Identified!..........................................................................................................................!3"9!
        3.3.3! Adequacy!of!Treatment!Approach!.....................................................................................................!3"9!
        3.3.4! Residuals!Handling!...........................................................................................................................!3"11!
        3.3.5! Feed!Water!Characterization!...........................................................................................................!3"12!
        3.3.6! Quality!of!Project!Information!.........................................................................................................!3"12!
        3.3.7! Omissions!or!Fatal!Flaws!.................................................................................................................!3"12!
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        4.1.1! Plant!Design!Capacity!........................................................................................................................!4"1!
        4.1.2! Targeted!Product!Water!Quality! .......................................................................................................!4"2!
                                                     .



                                                                            December 2012                                                                             Page i
INTRODUCTION                                                                          MONTEREY PENINSULA REGIONAL WATER AUTHORITY


        4.1.3! Disinfection!Strategy!..........................................................................................................................!4"3!
     2-1! 5%%!7+'%"!5%(+4!85759!------------------------------------------------------------------------------------------------------------------------------!2"2!
        4.2.1! Plant!Design!Capacity!........................................................................................................................!4"4!
        4.2.2! Targeted!Product!Water!Quality! .......................................................................................................!4"4!
                                                       .
        4.2.3! Disinfection!Strategy!..........................................................................................................................!4"5!
     2-:! !%#!4%(!*#((!4+05,0;!8!*49! ------------------------------------------------------------------------------------------------------------------------!2"3!
                                      -
        4.3.1! Plant!Design!Capacity!........................................................................................................................!4"5!
        4.3.2! Targeted!Product!Water!Quality! .......................................................................................................!4"5!
                                                       .
        4.3.3! Disinfection!Strategy!..........................................................................................................................!4"6!
8!       !#0/0)&#(!...........................................................................................................................................!8"1!
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                                     -
6!       &)3:!)!/%*%&0/!#0/(&1!+*%&0/(! ....................................................................................................!6"1!
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                                        -
        6.3.1! Assessment!of!Impacts!of!Seawater!Intake!.......................................................................................!6"9!
        6.3.2! Brine!Discharge!................................................................................................................................!6"10!
7!       +!6!+!/#!(!...........................................................................................................................................!7"1!
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                                                           LIST OF TABLES
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                                                          LIST OF FIGURES

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Page ii                                                                 December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                                                                       TABLE OF CONTENTS


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                                 ABBREVIATIONS AND ACRONYMS
AACE – Association for the Advancement of Cost Engineering
AF – Acre-Foot
AFY – Acre-Feet/Year
ASR – Aquifer Storage and Recovery
Cal-Am – California American Water
CDPH – California Department of Public Health
CEQA – California Environmental Quality Act
CPCN - Certificate of Public Convenience and Necessity
CPUC – California Public Utilities Commission
CRF – Capital Recovery Factor
Crypto - Cryptosporidium
CSIP – Castroville Seawater Intrusion Project
DWD – DeepWater Desal
EA – Environmental Assessment
EIR – Environmental Impact Report
EIS – Environmental Impact Statement
EPA – U.S. Environmental Protection Agency
ERD – Energy Recovery Device
fps – feet per second
FPVC – Fusible Polyvinyl Chloride\
gfd – Gallons per Day per Square Foot
GWR – Groundwater Replenishment
HDPE – High Density Polyethylene
JPA – Joint Powers Authority



                                                                     December 2012                                                                    Page iii
INTRODUCTION                                    MONTEREY PENINSULA REGIONAL WATER AUTHORITY


KHC – Kris Helm Consulting
lb - pound
LF – Lineal Foot
MCL – Maximum Contaminant Level
MPRWA – Monterey Peninsula Regional Water Authority
MRWPCA – Monterey Regional Water Pollution Control Agency
mgd – Million Gallons per Day
MF – Microfiltration
MG – Million Gallons
MLCP – Moss Landing Commercial Park
MLPP – Moss Landing Power Plant
MPWSP – Monterey Peninsula Water Supply Project
NEPA – National Environmental Policy Act
NOD – Notice of Determination
NOP – Notice of Preparation
NOAA – National Oceanic and Atmospheric Administration
NPDES – National Pollutant Discharge Elimination System
O&M – Operations and Maintenance
PG&E – Pacific Gas and Electric
PML – Peoples Moss Landing
RO – Reverse Osmosis
SCADA – Supervisory Control and Data Acquisition
SDI – Silt Density Index
SPI – Separation Processes Inc.
SVGB – Salinas Valley Groundwater Basin
SWRCB – State Water Resources Control Board
SWTR – Surface Water Treatment Rule
TAC – Technical Advisory Committee
TBD – To Be Determined
TDS – Total Dissolved Solids
TOC – Total Organic Carbon
UF - Ultrafiltration
UV – Ultra Violet Light


Page iv                                December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                       EXECUTIVE SUMMARY


!"!#$%&'!()$**+,-(
Separation Processes Inc. (SPI) in association with Kris Helm Consulting (KHC) is providing
engineering and consulting support to the Monterey Peninsula Regional Water Authority
(MPWRA) to assist with the evaluation of three candidate desalination projects on the Monterey
Peninsula. This report presents the results of our evaluation of the projects, targeted at replacing
supplies currently extracted from the Carmel River but subject to a 1995 order from the State
Water Resources Control board to secure an alternate source of supply by December, 2016.
The proposed strategy for meeting the projected annual demand within the California American
Water service area of 15,250 acre-feet is a multi-pronged approach including permitted
extractions from the Carmel River and Seaside Basin, an aquifer-storage and recovery system,
and the existing Sand City desalination plant--totaling 6,250 acre-feet; leaving a 9,000 acre-feet
gap in supply. Two alternatives are under consideration to compose this final supply—a 9,000
acre-feet production seawater desalination plant; or a 5,500 acre-feet seawater desalination plant
in concert with a groundwater water replenishment project using advanced treated recycled water
of 3,500 acre-feet.
This report presents the results of our evaluation of three candidate alternatives for the seawater
desalination component of the overall water supply portfolio. California American Water is
actively engaged with the California Public Utilities Commission to build a facility and secure
the required supply. Two other development groups have proposed alternative projects for
consideration—DeepWater Desal, LLC and the People’s Moss Landing Water Desal Project.
The three projects were analyzed on functional, performance, economic and implementation
grounds in an effort to provide a balanced evaluation for consideration by the MPRWA. This
report is based on information collected on each project up through October 15, 2012. It does
not cover additional project developments between that time and the date of this report.

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The three projects are in the conceptual or preliminary stage of development and all three have as
their objective to provide California American Water the seawater desal component of the
required replacement water supply under State Water Resources Control Board Order No. 95-10.
The DeepWater Desal group proposes to provide an expandable plant capable of serving
additional regional water needs as well, outside of the California American Water service area.
Brief summaries of the projects follow:


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                                            December 2012                                   Page ES-1
INTRODUCTION                                          MONTEREY PENINSULA REGIONAL WATER AUTHORITY




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We evaluated the function of each project in terms of project purpose, customers identified,
adequacy of treatment approach, residuals handling, feed water characterization, quality of
project information, and any omissions or fatal flaws in the information provided. The
evaluation was conducted based on information provided in response to a 56-item questionnaire
prepared by the MPRWA technical advisory committee and submitted by each proponent; along
with additional information each provided in response to specific questions and interviews from
SPI and KHC.
All three projects have available sites for building the required treatment facilities; and credible
seawater intake and brine disposal approaches, though there are substantive differences among
them. Cal-Am proposes to use a group of subsurface slant intake wells (up to eight for the
maximum capacity plant alternative); DWD proposes a new screened open ocean intake installed
at roughly 65-ft of depth; and PML is considering options to use either an existing seawater
intake pump station drawing from the Moss Landing Harbor, or potentially a new screened open
ocean intake installed coincident with an existing 51-in diameter concrete outfall pipeline owned


Page ES-2                                   December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                     EXECUTIVE SUMMARY


by the Moss Landing Commercial Park. Cal-Am has projected there may up to 3 percent of
groundwater from the Salinas Valley Groundwater Basin (SVGB) entrained with their intake
supply that would need to be returned (as facility product water) to the basin. For brine disposal,
Cal-Am and DWD propose to blend concentrated brine from the desal plants with existing
outfall flows—Cal-Am blending with the existing Monterey Peninsula Regional Water Pollution
Control Agency’s wastewater plant outfall; and DWD using the existing cooling water return
outfall at the Moss Landing Power Plant. Both sources have sufficient dilution and hydraulic
capacities. PML proposes to use their existing 51-in diameter outfall, currently permitted to
discharge magnesium-depleted seawater. There is some evidence of disrepair of the outfall in
terms of pipeline integrity and condition of the existing diffusers which would need to be
addressed along with the permitting of a non-shore diluted brine stream.
Cal-Am and PML propose to serve only the identified demand within the Cal-Am service area at
the two plant capacity increments under consideration; while DWD envisions a higher capacity
regional project, capable of producing up to 25,000 AFY. DWD has not yet secured agreements
with any potential customers.
In terms of treatment approach—all three candidate teams propose to use reverse osmosis (RO)
as the primary desalination technology. However, both DWD and PML propose a single pass
RO system; while Cal-Am has proposed a partial double or two pass system—treating a portion
of the product water from the first pass RO system with a second RO system and blending the
supplies to form the final treated water. The issue relates to the quality of product water
produced, more than treatment function; as either approach is considered functional.
Pre- and post-treatment approaches are similar. All incorporate granular media filtration of the
incoming seawater, with PML following on with a low pressure membrane filtration system
(microfiltration or ultrafiltration) to deal with the anticipated higher solids load from water
extracted from Moss Landing Harbor. In the case of Cal-Am, the aquifer filtration provided by
the slant wells could obviate the need for media filtration; but the potential presence of iron and
manganese in the supply could just as well make them necessary—so the approach is considered
conservative. In the case of DWD, the incoming seawater extracted at depth will be cold
(roughly 15 ºC) and warmed through a proprietary warming system at the Moss Landing Power
Plant prior to transmission to the treatment plant site. All three proponents propose to use calcite
beds, carbon dioxide and sodium hydroxide for re-mineralization/stabilization of the RO treated
product water and chlorine disinfection.
Cal-Am and DWD will require offsite pipelines for feed, product water and brine disposal; while
PML proposes to use existing intake and outfall pipelines originating on site; requiring only a
product water delivery pipeline. DWD’s site location north of the Elkhorn Slough is likely to
entail complex issues with crossings for all three of their large diameter pipelines (one 48-in and
two 36-in).
All three proponents were cooperative with our evaluation and provided all available and
requested information. The Cal-Am project through past work on other regional projects as well
as ongoing procedures with the California Public Utilities Commission has produced the most
detailed information on their project, followed by DWD who have prepared a fair amount of
predesign data on their proposed system along with active environmental investigations for their
proposed intake. PML is at a more preliminary level of engineering and planning in comparison.




                                           December 2012                                   Page ES-3
INTRODUCTION                                        MONTEREY PENINSULA REGIONAL WATER AUTHORITY


Importantly however, we have not found any fatal flaws of a technical nature associated with any
of the candidate projects.


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Performance of each proposed system was gauged relative to categories of plant design capacity,
targeted product water quality and disinfection strategy.
For plant capacity, we considered the proposed instantaneous design capacity of each treatment
facility in comparison to the required annual production increment—either 5,500 AFY or 9,000
AFY. What we found were wide variations—with Cal-Am proposing capacities of 5.4 mgd and
9.0 mgd; DWD of 4.9 mgd and 9.1 mgd; and PML at 4.8 mgd and 9.4 mgd. We considered the
level of equipment redundancy proposed by each team in the context of the amount of “online”
time it would require a facility at a given rated capacity to deliver the required annual allotment.
For Cal-Am, we gauged their planned design capacities adequate considering the need to return
flow to the SVGB as well as meet the 5,500 AFY or 9,000 AFY into their distribution system.
At capacities of 5.4 mgd and 9.0 mgd, the plant(s) would need to operate 98 percent of the time
to meet production—not overly conservative but achievable given the level of equipment
redundancy (including spare process units) in their proposed facility. DWD, with similar
proposed levels of redundancy, would have equivalent minimum facility capacity requirements
of 5.0 mgd and 8.2 mgd; somewhat lower than Cal-Am as they lack the requirement to return
flow to the SVGB. PML did not provide a detailed equipment list indicating numbers of process
units; so gauging proposed levels of equipment redundancy was uncertain. However, we feel the
facility should have adequate reliability and conducted our evaluation on that basis—
recommending equivalent capacity ratings to DWD of 5.0 mgd and 8.2 mgd.
The product quality produced by the proposed systems would differ based on the configuration
of their proposed RO systems. Cal-Am’s proposed partial two-pass system could likely achieve
chloride, boron, and total dissolved solids (TDS) consistent with current Carmel River supplies;
but the single pass systems would not. We consider a lower salinity product supply an asset and
evaluated all three projects (from an economic perspective) as having partial two-pass RO
systems. The recommended product quality goal is summarized in Table ES-1.
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Page ES-4                                  December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                   EXECUTIVE SUMMARY


For disinfection, the proposed facilities must comply with the Surface Water Treatment Rule and
Long-Term 2 Enhanced Surface Water Treatment Rule. Under these regulations, pathogen
removal/inactivation requirements are set on a logarithmic (log) scale, with the California
Department of Public Health establishing specific log removal for priority pathogens, including
giardia, cryptosporidium (crypto), and virus. The levels set will be based on source water quality
and other factors, and are expected to be in the range of 3-5 for giardia, 2-4 for crypto, and 4-6
for virus, based on each of the project source waters being classified as surface waters or under
the influence of surface waters. We find all three projects are likely to achieve sufficient log
removal credits under their proposed treatment schemes to comply.
&'$\$+-')
A primary focus of our evaluation was to provide a balanced, “apples to apples” comparison of
the candidate projects from an economic perspective. We implemented this by focusing on the
following principles:
   !       Uniformity in plant design capacity for the two non-regional approaches; equivalent
           capacity allocation for the proposed DWD regional project.
   !       Equivalency in treatment to achieve: a common RO feed water quality following
           pretreatment; a common treated water quality goal; and pathogen removal credits
           required for the applicable supply source.
   !       Uniformity in equipment redundancy.
   !       Uniformity in unit cost criteria for common items.
   !       Uniformity in cost factors applied to aggregated costs (e.g., contingencies; electrical
           and I&C costs; etc.).
   !       Uniformity in unit costs for chemicals and other consumables for treatment
           evaluations.
To implement the above, we adjusted plant capacities for the evaluation on the basis described in
the Project Performance discussion, rating Cal-Am’s proposed system at design capacities of 5.4
mgd and 9.0 mgd; and the DWD and PML systems at 5.0 mgd and 8.2 mgd. In terms of
treatment process, we attempted to maintain the overall proposed process design of the
proponents, but did evaluate all as including a partial (40 percent) capacity second pass RO
system. We also assumed N+1 redundancy on all rotating equipment and major treatment
process units (e.g., filters, RO membrane trains). We employed an equivalent basis in
developing our capital equipment cost estimates, relying on targeted quotes for equipment and
SPIs cost information from past, similar seawater RO projects. For indirect costs, we assumed
fixed factors and applied them uniformly to each project.
We implemented a similar strategy on annual operating and maintenance expenses, using
common chemical unit prices along with pricing on common consumables, such as the RO
process membranes. The results of our evaluation are presented in Table ES-2.
Legal and financial considerations, such as water rights and payment schedules (for example,
Surcharge 2 proposed by Cal-Am) were outside the scope of this evaluation and are not
addressed herein. Overall, the costs presented are meant for comparative evaluation on a
planning basis. They have an overall accuracy level of -30 to +50 percent.



                                          December 2012                                  Page ES-5
INTRODUCTION                                                                           MONTEREY PENINSULA REGIONAL WATER AUTHORITY


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  1Includes implementation costs at 25%; ROW easement/land costs, mobilization/demobilization at 2%; electrical and I&C systems at 18%; engineering and
      startup at 15%; and additional project proponent prescribed costs. All percentages applied to plant facilities costs.
  2 Calculated as 1.5% of plant facilities costs.
  3   Capital recovery factor for DWD and PML based on an interest rate of 4.0% and term of 30 years; based on an interest rate of 8.49% and 30 years for
      Cal-Am; see additional discussion in Section 5.




Page ES-6                                                                December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                     EXECUTIVE SUMMARY


Overall, the projected capital and operating costs for each facility are fairly equivalent given the
overall accuracy of the estimate and degree of project development. Cal-Am’s capital cost is the
highest; owing largely to its high intake system cost. PML is proposing to reuse existing intake
infrastructure; while DWD has an unspecified separate business entity which will be funding its
intake, outside of the assigned DWD facility budget. Cal-Am’s operating cost is also relatively
high, owing in large measure to higher stipulated energy costs than either DWD or PML—
roughly $0.13/kW-hr vs. $0.08 kW-hr. The overall water production costs diverge considerably
in our evaluation, due to the higher cost of capital assigned to Cal-Am vs. DWD and PML; so
while the base costs are similar, Cal-Am’s cost of water produced is higher. An expanded
discussion of how the capital recovery factor (CRF) for Cal-Am was generated is presented in
Section 5.


-+"B&+&\(,(-$\ '$\)-Q&#,(-$\)
The three projects are at varying states of development in terms of the regulatory permitting
process. Cal-Am is further along than either DWD or PML, though DWD has completed or is
nearing completion of their initial CEQA compliance documents.              Forecast project
implementation schedules were identified for each project proponent, based on a select number
of key environmental and permitting tasks, including:
   1. A project description must be completed.
   2. An Environmental Assessment must be made.
   3. An EIR/EIS must be completed (CEQA/NEPA compliance).
   4. Commercial Agreements must be negotiated/ Cal-Am must obtain a Certificate of Public
      Convenience and Necessity (CPCN), after certification of the EIR.
   5. Jurisdictional Permits must be obtained for facilities impacting Waters of the U.S.
   6. NPDES Permits must be amended/obtained.
   7. Coastal Development Permits must be obtained.
It was further assumed that each proponent had the financial capacity to proceed with predesign
preparation/procurement package development such that the project could be put out to final
design and construction bid coincident with approval of the final project permits. The schedules
are provided below as , Figure ES-2 and Figure ES-3. The project proponents were invited to
provide their updated schedules following publication of the draft report. Cal-Am and DWD
each elected to provide a schedule, which are included in Section 6.




                                           December 2012                                   Page ES-7
INTRODUCTION                                      MONTEREY PENINSULA REGIONAL WATER AUTHORITY


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Page ES-8                               December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                            INTRODUCTION



3 &O%,GL$#%&GO(
Separation Processes Inc. (SPI) and Kris Helm Consulting (KHC) are providing engineering and
consulting support to the Monterey Peninsula Regional Water Authority (MPWRA) to assist
with the evaluation of three candidate desalination projects on the Monterey Peninsula. SPI
conducted technical and economic evaluations of the proposed projects; while KHC examined
issues relating to permitting and environmental compliance.
California American Water (Cal-Am) is an investor owned public utility who is responsible for
providing the water supply to cities covered within the MPRWA—Carmel-by-the-Sea, Del Rey
Oaks, Monterey, Pacific Grove, Sand City and Seaside. The proposed projects would
supplement supply previously extracted for the region from the Carmel River. In 1995, the State
Water Resources Control Board (SWRCB) in its Order No 95-10 found that Cal-Am was
withdrawing water from a subterranean stream, rather than percolating groundwater; and in the
process extracting an average of 10,730 AFY in excess of its valid right of 3,376 AFY. The
order required Cal-Am to secure a replacement source of supply by December 2016.
The average annual water demand in the region is 15,250 AFY1. Currently identified sources
include established rights to Carmel River and Seaside Basin waters of 4,850 AFY, the aquifer
storage and recovery (ASR) system of 1,300 AFY, and 94 AFY from the Sand City Desalination
Plant. This leaves a roughly 9,000 AFY deficit to be made up. Alternatives include a new 9,000
AFY seawater desalination plant; and a new groundwater replenishment (GWR) project of 3,500
AFY in combination with a new 5,500 AFY seawater desalination plant.
The technical advisory committee (TAC) of the MPRWA developed a list of 56 questions to
submit to the three desalination project proponents, including Cal-Am, DeepWater Desal, LLC
(DWD) and the Peoples’ Moss Landing Desal (PML). Each proponent is proposing to build a
desalination facility to satisfy the planned desalination component of the regional water supply.
Responses and supporting information were received from each, exhibiting various stages of
development and differences in approach. The differences were such that a deliberative, fair
comparative evaluation could not be conducted solely on the basis of the information provided.
This report presents the results of a more detailed evaluation and analysis conducted by SPI and
KHC. The work was conducted based on information provided in the original responses to the
questions from the TAC along with supplemental information provided by each proponent. The
goal was to provide an “apples-to-apples” comparison of each project on an equivalent cost
basis; along with an evaluation of the realistic implementation schedule for each, taking into
account environmental and permitting issues.




1
 RBF Memorandum, Recommended Capacity for the Monterey Peninsula Water Supply Project (MPWSP)
Desalination Plant, April 20, 2012


                                           December 2012                                        Page 1-1
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                    PROJECT SUMMARIES




D ;,GP!#%()$**+,&!)(
The tabular summaries provided in this section include information on each of the proponent
projects, including:

   !       Project name
   !       Proponent(s)
   !       Location
   !       Purpose
   !       Production volume
   !       Key features
   !       Facility map
   !       Key information provided to review team
   !       Persons interviewed/corresponded with
The TAC requested information from each proponent that would satisfy the desalination
component of the proposed water supply. Responses received from the Cal-Am and PML
groups were generally in line with this request; though there were slight differences in the
proposed plant capacities. The DWD response proposed to only serve the higher 9,000 AFY
requirement, along with a planned expansion to act as a regional water supply source to other
agencies on the peninsula as well as cities north of Moss Landing. DWD did reveal in response
to subsequent inquiries how they would serve the 5,500 AFY supply scenario. The information
presented for each project represents their current status from the proponents at the time of this
report writing.




                                          December 2012                                   Page 2-1
PROJECT SUMMARIES                                MONTEREY PENINSULA REGIONAL WATER AUTHORITY


TLW        ',B-R$#\-, ,+&#-',\ 9,(&# =',BA,+>
Project Name                              Monterey Peninsula        Water     Supply    Project
                                          (MPWSP)
Proponent(s)                              California American Water
Location                                  46-acre site of vacant, disturbed land west of the
                                          MRWPCA Regional Treatment Plant (RTP).
Purpose                                   To supply supplemental desal component of the
                                          Monterey Peninsula regional water supply
                                          This project is currently under consideration by the
                                          California Public Utilities Commission (CPUC).
Production Volume                         5.4 mgd or 9.0 mgd
Key Features                              1. Raw seawater supply through a series of up to
                                             eight sub-surface slant wells located on a vacant
                                             376 acre parcel with roughly 7,000 feet of ocean
                                             shoreline.
                                          2. Raw water and pump to waste transmission
                                             through one of eight candidate alignments.
                                          3. Single-stage, dual media pressure filtration
                                             pretreatment.
                                          4. Partial 2-pass RO desalination treatment with
                                             energy recovery. Final product has a proposed
                                             blend of 60:40 first pass:second pass product.
                                          5. Product stabilization with calcite, carbon dioxide,
                                             and sodium hydroxide.
                                          6. Disinfection with sodium hypochlorite and
                                             temporary UV.
                                          7. 2 x 1.0 MG product storage tanks, product
                                             distribution pumps, and 36-in diameter product
                                             pipeline to Cal-Am distribution system near
                                             Seaside.
                                          8. 24-in brine disposal pipeline to the existing RTP
                                             outfall.
Key Information Provided                  1. TAC response package
                                          2. Response to supplemental questions from SPI
                                             and KHC
                                          3. Relevant testimony to the CPUC
                                          4. RBF 2011 memo on implementation schedule
                                             risk of regional supply alternatives
                                          5. RFB 2011 memo on cost analysis of regional
                                             supply alternatives
Persons Interviewed/Corresponded With     Richard Svindland




Page 2-2                                December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                 PROJECT SUMMARIES




                               ICH571(D23(4(#.02+6(;79J1?@(N9?.@C9F(*.<((


                                    !


          ____ Slant Well
          ____ Intake
          ____ Brine
          ____ Product Water
              Desalination Plant
              Tie-in to CAL AM
              existing facilities




                                             December 2012                            Page 2-3
PROJECT SUMMARIES                                MONTEREY PENINSULA REGIONAL WATER AUTHORITY


TLT        Q&&"9,(&# Q&),B =Q9Q>
Project Name                              DeepWater Desal
Proponent(s)                              DeepWater Desal, LLC, Dynegy Moss Landing
                                          Power Plant, MFJK Partnership of the Capurro
                                          Ranch, PV2 Solar, and Ecomert Technologies
Location                                  Capurro Ranch Property, north of /Elkhorn Slough
Purpose                                   Phase 1 to supply supplemental desal component of
                                          the Monterey Peninsula regional water supply
                                          Phase 2 to supply northern customers
Production Volume                         Phase 1: 4.9 mgd or 9.1 mgd
                                          Phase 2: 22.0 mgd
Key Features                              1. Raw seawater supply through a new 48-in open
                                              intake extending into the Monterey Bay west of
                                              Moss Landing at a depth of roughly 65-ft.
                                          2. Raw water transmission through an existing
                                              right of way maintained by MLPP to an existing
                                              pump station at MLPP for transfer to the site.
                                          3. Proprietary warming system at MLPP which
                                              will increase the temperature of the raw water.
                                          4. Transmission of the warmed feed water through
                                              a new 36-in pipeline to the Capurro Ranch site.
                                          5. Single-stage, dual media pressure filtration
                                              pretreatment.
                                          6. Single-pass RO desalination treatment with
                                              energy recovery.
                                          7. Product stabilization with calcite, carbon
                                              dioxide, and corrosion inhibitor.
                                          8. Disinfection with sodium hypochlorite.
                                          9. 2.5 MG product storage tank, product
                                              distribution pumps, and 30-in diameter product
                                              pipeline to Cal-Am distribution system near
                                              Seaside.
                                          10. 36-in brine disposal pipeline to MLPP existing
                                              cooling water ocean discharge.
Key Information Provided                  1. TAC response package
                                          2. Response to supplemental questions from SPI
                                             and KHC
                                          3. Tenera Environmental, Preliminary Modeling of
                                             Potential Impacts from Operation of a
                                             Desalination Facility Ocean Intake, August 22,
                                             2012
Persons Interviewed/Corresponded With     Dennis Ing, Scott Jackson, Jonathan Dietrich


Page 2-4                                December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                             PROJECT SUMMARIES


                               ICH571(D2D(4(LAL(;79J1?@(N9?.@C9F(*.<(




         ____ Intake
         ____ Brine
         ____ Product Water
              Desalination Plant
              Tie-in to CAL AM
              existing facilities




                                                                                 !




                                           December 2012                             Page 2-5
PROJECT SUMMARIES                                MONTEREY PENINSULA REGIONAL WATER AUTHORITY


TL]        "&$"B&) +$)) B,\Q-\g ="+B>
Project Name                              The People’s Moss Landing Water Desal Project
Proponent(s)                              DeSal America, LLC composed of Moss Landing
                                          Commercial Park, LLC; and Stanley and Patricia-
                                          Vance Lueck
Location                                  Moss Landing Commercial Park
Purpose                                   To supply supplemental desal component of the
                                          Monterey Peninsula regional water supply
                                          This project is currently proposed as alternative to
                                          the Cal-Am MPWSP.
Production Volume                         4.8 mgd or 9.4 mgd
Key Features                              1. Raw seawater supply through an existing intake
                                             system drawing from the Moss Landing Harbor.
                                          2. Single-stage, zeolite pressure filtration followed
                                             by ultrafiltration (UF) pretreatment.
                                          3. Single-pass RO desalination treatment with
                                             energy recovery.
                                          4. Product stabilization with calcite, carbon
                                             dioxide, and sodium hydroxide.
                                          5. Disinfection unspecified, but presumed to be
                                             with sodium hypochlorite.
                                          6. Product storage in existing site tankage. New
                                             distribution pump station and 36-in diameter
                                             product pipeline to Cal-Am distribution system
                                             near Seaside.
                                          7. Brine disposal through existing 51-in (internal
                                             diameter) outfall.
Key Information Provided                  1. TAC response package
                                          2. Project information package dated July 2012
                                          3. Response to supplemental questions from SPI
                                             and KHC
                                          4. Video of a portion of the existing outfall.
                                          5. August 2012 Structural Evaluation Report of site
                                             structures and outfall, conducted by JAMSE
                                             Engineering, Inc.
                                          6. Construction drawings for the outfall (1973) and
                                             modifications made to the intake pump station
                                             (1968).
                                          7. September 2012 Environmental Issues and
                                             Constraints Report by SMB Environmental Inc.
Persons Interviewed/Corresponded With     Nader Agha, George Schroeder, Stanley Lueck




Page 2-6                                December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                             PROJECT SUMMARIES


                               ICH571(D2M(4(;*N(;79J1?@(N9?.@C9F(*.<(




          ____ Intake
          ____ Brine
          ____ Product Water
              Desalination Plant
               Tie-in to CAL AM
               existing facilities




                                                                                 !




                                           December 2012                             Page 2-7
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                                    PROJECT FUNCTION




M ;,GP!#%(I$O#%&GO(
The function of each proponent project is evaluated on the following criteria:
      !      Project purpose
      !      Customers identified
      !      Adequacy of treatment approach
      !      Residuals handling
      !      Feed water characterization
      !      Quality of project information
      !      Omissions or fatal flaws
In an initial screening level evaluation2, we found no disqualifying criteria for any of the
candidate projects. We did however find differences in the level of project development and
approach. Each project is discussed separately below.

]LW       ',B-R$#\-, ,+&#-',\ 9,(&# =',BA,+>
!.1.1          Pro'ect Purpose
Cal-Am proposes their project to serve the needs of the identified demand on the Monterey
Peninsula within their service area to comply with SWRCB Order 95-10. The proposed
treatment plant would serve the identified desalination component of the regional water supply
portfolio. They specifically do not propose to provide a plant capacity in excess of defined
regional water supply requirements under two scenarios—with GWR and without GWR3.


!.1.2          Customers Identified
Treated water would be supplied to the Cal-Water distribution system for service to its current
service area. Any groundwater from Salinas Basin drawn through the proposed supply wells
would be returned the basin as plant treated water through the Castroville Seawater Intrusion
Project (CSIP) ponds3.


!.1.!          Ade8uacy of Treatment Approach
Feed water for the desalination plant would be extracted from subsurface slant wells. Over the
long term, feed water is projected to include about 97 percent seawater and 3 percent intruded
groundwater from the Salinas Valley Groundwater Basin (SVGB)3. The desalination plant will
be operated such that on an annual average basis, the plant would return desalinated water to the
SVGB in an amount equal to the freshwater extracted from the slant wells.


2
 SPI Memorandum, Monterey Desalination Study – Initial Scoping and Constraints Analysis, August 30, 2012
3
 Direct Testimony of Richard C. Svindland Before the Public Utilities Commission of the State of California, filed
April 23, 2012


                                                  December 2012                                            Page 3-1
PROJECT FUNCTION                                          MONTEREY PENINSULA REGIONAL WATER AUTHORITY


The preferred site for construction of the slant wells is an approximately 376 acre parcel of land
with 7,000 feet of ocean shoreline, located west of the proposed desal plant site. The angle of the
slant wells will be determined by a proposed test well program, with a maximum well length of
approximately 750 lineal feet. Wells would initially be placed on the beach, as far as possible
from the existing shoreline, but avoiding undisturbed dune habitat. This may cause some or all
wells to be within the predicted 50-year erosion boundary; however, the expected useful life of
the wells is less than 50 years. A contingency plan will be needed for relocating the wells inland
in the event that coastal erosion renders the wells inoperable4.
Two design capacities are proposed: (1) seven wells operating at 2,200 gpm per well plus one
additional well as a backup, for a total of 22 mgd (15,400 gpm) producing 9.0 mgd of product
water; (2) five wells operating at 1,840 gpm per well plus one additional well as backup, for a
total of 13.2 mgd (9,200 gpm) producing 5.4 mgd of product water4.
Eight feed water pipeline alignments are being considered, all of which will be made of HDPE or
FPVC, and will have a 30-inch or 36-inch diameter. The final selected alignment would include
a parallel 16-in diameter pump to waste pipeline, to allow wasting of initial produced water from
a pump following startup.
The proposed treatment plant would be located on a vacant but disturbed 46-acre parcel west of
the MRWPCA Regional Treatment Plant (RTP). The site would be accessed off of Charles
Benson Rd., a two-lane roadway that also serves the MRWPCA RTP along with the Monterey
Regional Waste Management District. Access would be via an easement from the Waste
Management District. A new turn lane would need to be provided to allow safe access to the
proposed desal plant for personnel and chemicals deliveries. Cal-Am is currently in negotiations
to purchase the site from the existing land owner. Overall, land acquisition is not a large concern
as Cal-Am has the authority to exercise eminent domain privileges should a negotiated purchase
prove untenable.
Incoming seawater would be stored in two 0.5 MG storage tanks then pumped to granular media
pressure filters. Provisions would be included to pre-chlorinate the filter feed if necessary; as
well as include proprietary media to remove iron and manganese should it be present in the raw
seawater. Filter effluent would be dechlorinated if necessary, then flow to inline cartridge filters
prior to routing to the RO trains. The proposed RO system would be arranged as a full single
pass and partial second pass; with the second pass product making up 40 – 50 percent of the final
product supply. The first pass trains would include high pressure booster pumps and isobaric
energy recovery devices (ERDs); while the second pass trains would be equipped with high
pressure booster pumps only. Operating recovery of the first pass trains would be roughly 45.5
percent; while the second pass trains would operate at 90 percent. First and second pass trains,
related pumps, and ERDs would be arranged in an N+1 configuration, with a total of four
process trains for the 5.4 mgd plant option and six process trains for the 9.0 mgd plant option.5
The product water from the RO system would be post-treated with calcite and carbon dioxide for
stabilization, along with addition of a corrosion inhibitor. For disinfection, the product would be
dosed with sodium hypochlorite and stored in two, 1.0 MG storage tanks. Provisions may be
included for a temporary or permanent UV disinfection system as well, should conditions
warrant (e.g., if additional disinfection credits are required).5
4
    RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Project Description, April 20, 2012
5
    Cal-Am Response to SPI Questions, October 3, 2012


Page 3-2                                        December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                               PROJECT FUNCTION


Overall the treatment approach is gauged to be sound. The greatest process risk is likely
associated with the proposed slant wells. Slant well intake systems can provide significant
advantages over traditional open ocean intakes including:
    !       Natural filtration
    !       Avoidance of impingement and entrainment of marine life
    !       No ocean construction impacts
    !       No permanent aesthetic impacts.
However, slant wells can also pose more construction challenges than other well types as a result
of shallow construction angles and less vertical gravitational force. Slant wells need periodic
access to the well head area. In areas where recreation exists (e.g., at a public beach) provision
must be made to minimize disturbance6. Slant well intakes can be used with large desalination
plants, with seawater intake capacities of up to 50 mgd7. Maintenance of well specific capacity
long term is unknown; and elsewhere where employed the wells have been known to initially
draw from an ancient marine aquifer containing high levels of iron and manganese8. Lastly, the
specific long term amount of groundwater uptake from the SVGB, estimated at up to 3 percent,
is uncertain.
Cal-Am plans to install a test slant well to establish site specific operating conditions and
generate data which should help to confirm actual conditions and allow development of
appropriate mitigation strategies. Cal-Am has already included provisions for removing iron and
manganese across their pretreatment filters if necessary. The slant wells themselves can be
screened or installed at different angles to control the mix of seawater to diluent water extracted.
Cal-Am is currently pursuing permits for the test well. An initial operating period of 6 – 12
months is planned to develop data required for the EIR CEQA work. Cal-Am has indicated that
the test period could extend as long as 18-24 months if additional data is required5. Should the
test well reveal slant wells to be problematic, a more conventional Ranney sub-surface intake
well could be used as an alternative. The conceptual layout would include three vertical caissons
and horizontal well clusters located across a 1,000 – 1,500 feet beach front area. Each caisson
would be capable of extracting up to 10 mgd. Costs would roughly equivalent to the proposed
slant wells; however, shoreline disruption would be greater.
With either intake system, delivered raw seawater quality is likely to be good, with low
particulate and silt density index (SDI) levels, making single-stage filtration an acceptable
pretreatment approach. The RO process design is conservative, with a full first pass and partial
second pass; including N+1 redundancy for all process units. The proposal does not include
acidification or antiscalant dosing to the first pass RO system feed water, but this is likely
acceptable as the planned recovery of the first pass system is limited to 45 percent. Feed and
product storage tanks are arranges as 2 x 50 percent units, allowing the ability to take a tank out

6
  Williams, D.E. – Design and Construction of Slant and Vertical Wells for Desalination Intake. IDA World
Congress-Perth Convention and Exhibition Centre (PCEC) – Perth, Western Austrailia September 4-9, 2011 – REF:
IDAWC/PER11-050
7
  Pankratz, T. – A Review of Seawater Desal Intake, Pretreatment & Discharge Technologies. IDA – Iran 06 WDTS
Proceedings September 17 & 18, 2006
8
  Ghiu, S. – 18 Month Demonstration of Slant Well Intake System Pretreatment and Desalination Technology for
Seawater Desalination. WaterReuse Research Conference Proceedings, June 2012.


                                               December 2012                                         Page 3-3
PROJECT FUNCTION                                        MONTEREY PENINSULA REGIONAL WATER AUTHORITY


of service for maintenance. A preliminary site plan indicates the proposed site is sufficient to
accommodate the proposed treatment plant facilities and related administrative and maintenance
facilities adequately.


!.1.4        Residuals Handling
Plant residuals would be handled in a combination of storage and transfer systems. Backwash
waste from the filters would be collected in a 0.5 acre storage pond, with decant disposed with
the RO brine. RO brine would be sent to the MRWPCA ocean outfall. Analyses have shown
that the outfall has sufficient capacity to accommodate the projected peak brine flow from the
plant under all but a worst case hydraulic loading scenario that is anticipated to last for six
hours9. In these situations, brine would temporarily be stored on site in a 3.0 MG detention
pond. The majority of the time (96 percent) the outfall is projected to have sufficient capacity.
Waste residuals from the RO cleaning system would be neutralized and discharged with the brine
to the outfall as well; or alternately to the site sanitary sewer if disposal with the brine is not
permitted.


!.1.B        Feed Water CharacteriEation
There has been no detailed characterization of plant feed water to date. Data will be generated as
part of the planned test well program.


!.1.6        Guality of Pro'ect Information
Available documentation for the Cal-Am project is the most extensive and well developed
among the three proponents. Primarily this is a consequence of their involvement in the
previously proposed regional project with Marina Coast Water District along with filings to the
CPUC supporting their proposed project and development of required CEQA documentation.
Appendices to their response to the TAC included the following:
    !       RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Capital and
            O&M Cost Estimate Update, April 20, 2012.
    !       RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Project
            Description, April 20, 2012.
    !       Direct Testimony of Jeffrey T. Linam Before the Public Utilities Commission of the
            State of California, Filed April 23, 2012.
Other project related documents were available on the Monterey Peninsula Water Supply Project
website, including:
    !       California America Water Company, Coastal Water Project, Final Environmental
            Impact Report, October 30, 2009.
    !       Download Filings for Proceeding A1204019

9
 Trussel Technologies Inc. Technical Memorandum, MRWPCA Outfall Hydraulic Capacity Analysis, April 18,
2012.


Page 3-4                                      December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                     PROJECT FUNCTION


   !       Presentations, including Technical Workshops on Monterey Peninsula Water Supply
           Project (July 2012); Monterey Peninsula Water Supply Project Presentation (April
           2012); and Monterey Peninsula Water Supply Project Presentation (July 2012).
   !       Project Map (April 23, 2012).
   !       California American Water Application for Monterey Project (PDFA)
   !       California American Water Application for Monterey Project (POS, NOA,PDFA)
   !       California American Water Direct Testimony of Keith Israel, including a Technical
           Memo from Trussell Technologies, MRWPCA Outfall Hydraulic Capacity Analysis,
           April 18, 2012
   !       California American Water Direct Testimony of Jeffrey T. Linam
   !       California American Water Direct Testimony of Eric J. Sabolsice
   !       California American Water Direct Testimony of F. Mark Schubert, P.E.
   !       California American Water Direct Testimony of David P. Stephenson
   !       California American Water Direct Testimony of Richard C. Svindland
   !       California American Water Direct Testimony of Kevin Thomas
Cal-Am also provided a response to questions from SPI, including the following documents:
   !       Capital Cost Worksheet
   !       O&M Cost Worksheet
   !       RBF Memorandum, Implementation Schedule Risk Analysis of Water Supply
           Alternatives, October 24, 2011
   !       RBF Memorandum, Cost Analysis of Water Supply Alternatives, October 19, 2011
Overall the information is considered sufficient to evaluate the proposed project from a technical
and economic perspective.


!.1.7       Omissions or Fatal FlaJs
Our evaluation and investigation of the proposed Cal-Am project did not uncover any perceived
fatal flaws of a technical nature or significant omissions of project information.




                                           December 2012                                  Page 3-5
PROJECT FUNCTION                                    MONTEREY PENINSULA REGIONAL WATER AUTHORITY


]LT        Q&&"9,(&# Q&),B =Q9Q>
!.2.1         Pro'ect Purpose
DWD proposes a project that could serve both the defined demand within the Cal-Am service
area for a desal supply of either 5,500 AFY or 9,000 AFY along with an expanded supply for the
region with a total plant capacity of 25,000 AFY. The project is predicated on development of
certain components (e.g., the seawater intake, feed pipeline, brine pipeline) for the 25,000 AFY
plant, with cost allocation based on treated water flow to defined customers. DWD plans to
establish a joint powers authority (JPA) composed of local public agencies to ultimately
prosecute its project.
!.2.2         Customers Identified
DWD seeks to supply either 5,500 AFY or 9,000 AFY to Cal-Am. The balance of the proposed
plant capacity would be supplied to other customers. These may include the City of Santa Cruz,
Soquel Creek Water Distict, Pajaro Valley Water Management Agency, areas of North Monterey
County which may have a need and communities along the Highway 101 corridor between
Salinas and Santa Clara.
!.2.!         Ade8uacy of Treatment Approach
DWD proposes two plant design capacities to meet the 5,500 AFY and 9,000 AFY delivery
targets—4.9 mgd and 9.1 mgd. Each of these capacities is different than the Cal-Am listed flows
of 5.4 mgd and 9.0 mgd, respectively.
DWD proposes a new passive-screened open seawater intake drawing from Monterey Bay near
Moss Landing. Feed water would be withdrawn from a new 48-in. diameter pipe that would
replace an existing pipeline previously used by PG&E for offloading fuel oil. The intake pipe
would be 10,000 feet long and located at a depth of approximately 65-ft at its end. The pipe
terminus would be screened with a passive, cylindrical wedge-wire screen constructed with 2
mm. slot openings and a maximum design velocity of 0.5 fps through the screen to prevent
impingement of marine organisms.
The intake would cross Hwy. 1 through an existing utility tunnel; or space not permitting, a new
crossing. The line would connect to an existing, abandoned pump clear well at the Dynegy Moss
Landing Power Plant (MLPP). New pumps would be installed to transfer the influent seawater
from the clear well through a new 48-in diameter HDPE pipeline to the project site located
roughly one mile north of MLPP along Hwy. 1, a location known as the Capurro Ranch. En
route to the site, the water would transition through a proprietary warming system owned by
Dynegy, increasing its temperature from roughly 10 ºC up to as high as 34 ºC.
The project site is currently occupied by an active vegetable distribution facility, with two large,
refrigerated buildings on-site. The site is currently owned by MFLK Partnership, who are also
equity partners in DeepWater Desal LLC. DWD has secured a 34-year ground lease for the site
with an option to extend it for two successive 32-year periods. The site area is 8.14-acres; and
DWD has secured an option to lease an additional 8-acre parcel adjacent to the site should
additional area be required for plant construction.
No feed water storage tanks are proposed, with the supply pumped directly to granular media
pressure filters. Provisions would be included to pre-chlorinate the filter feed if necessary; as
well as include a filter aid coagulant (ferric chloride). Filter effluent would be dechlorinated if


Page 3-6                                   December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                                PROJECT FUNCTION


necessary, then flow to inline cartridge filters prior to routing to the RO trains. The proposed RO
system would be arranged as a single pass system. The trains would include high pressure
booster pumps and isobaric ERDs. Operating recovery of the first pass trains would be variable
between 43 and 47 percent. The RO trains, related pumps, and ERDs would be arranged in an
N+1 configuration, with a total of three process trains for the 4.9 mgd plant option and six
process trains for the 9.1 mgd plant option.10
The product water from the RO system would be post-treated with calcite and carbon dioxide for
stabilization, along with addition of a corrosion inhibitor. For disinfection, the product would be
dosed with sodium hypochlorite and stored in a single 2.5 MG storage tank.

Overall the treatment approach is gauged to be sound, though the proposed RO system design
would produce a lower quality product than the proposed Cal-Am system, consisting solely of a
single pass of RO treatment. The greatest process risk is likely associated with the proposed
open intake and feed water delivery system. Water quality sampling conducted at depth has
indicated the raw seawater will likely be low in turbidity and suspended solids. This is backed
up by available literature. Intake depth can have a significant impact on water quality. Sun rays
are absorbed by the ocean surface, limiting photosynthesis and algae quantity as depth increases.
It is for this reason that deep water intakes typically provide feed water with less biological
activity and fewer suspended solids than conventional open water/surface intakes. However, the
disadvantage is that seawater temperature decreases with depth, increasing either membrane
surface area or feed pressure required for treatment. On the other hand, more stable annual
temperatures at this depth may facilitate plant design and operation11. To address the
temperature issue, DWD has proposed warming the supply in proprietary system on the MLPP
site. The proposed system is subject to a non-disclosure agreement at present, limiting the
publicly available information. However, it appears the system will likely be integral to
operations at the MLPP, providing a cooling water source. The approach is certainly synergistic,
but it also in effect links operations between MLPP and the desal plant to a certain extent,
introducing potential reliability issues. In addition, there is no experience with the effect of
warming a deep source supply. There is potential for the increase in temperature to cause an
increase in biological activity and associated biological fouling within the treatment process.
There is no way to gauge the potential magnitude of this risk element at this time. The DWD
project proponents do not consider it a large concern and have not proposed a pilot test program
on the candidate source water and overall pretreatment process. The issue becomes what would
be the impact of a problem discovered once the project was built? Remedies may be limited if
the warming process is contingent on an agreement between Dynegy and DWD. If the warming
process could be bypassed, then the issues with cold water treatment would come into play,
increasing RO system operating pressures and potentially exceeding operating capabilities of
installed pumping equipment.
The RO process design from an operations perspective is conservative, with N+1 redundancy for
all process units. There is no proposed feed storage tank, which is considered acceptable; but the
lack of any type of redundancy in product storage is a concern; as any required maintenance on
the tank would necessarily require a shutdown of the treatment facility unless suitable temporary

10
 DWD Response to SPI Questions, September 12, 2012
11
 Cartier G., Corsin P. - Description of Different Water Intakes for SWRO Plants. IDA World Congress-
Maspalomas, Gran Canaria –Spain October 21-26, 2007 - REF: IDAWC/MP07-185.


                                                December 2012                                          Page 3-7
PROJECT FUNCTION                                          MONTEREY PENINSULA REGIONAL WATER AUTHORITY


storage could be obtained. A preliminary site plan indicates the proposed site is sufficient to
accommodate the proposed treatment plant facilities and related administrative and maintenance
facilities adequately.
From a process perspective, the proposed pretreatment system design is likely acceptable. There
is sufficient precedence for single stage filtration on open seawater intakes among successfully
operating facilities to provide confidence in this approach12. The proposal does not include
acidification or antiscalant dosing to the first pass RO system feed water, but this is likely
acceptable if recovery is limited to the proposed operating range. A larger concern is with the
RO system process design as a single pass system which would produce a treated product supply
with TDS, boron and chloride levels above the existing supplies from the Carmel River. It is our
recommendation that any desalination system incorporating RO as the primary process for
Peninsula customers include a partial (at least 40 percent) second pass RO system to further
improve product quality, especially at the elevated temperature operation proposed.


!.2.4         Residuals Handling
Backwash waste from the filters would be collected in a 175,000 gallon settling tank, with decant
sent to a separate 150,000 gallon tank for disposal along with the RO brine. RO brine would be
sent to back to MLPP for disposal along with the plant cooling water through their existing ocean
outfall at a projected dilution ratio between 20 and 60 to 1. DWD also proposes to neutralize
chemical cleaning wastes and dispose of them with the brine as well.
During our site visit it was made clear that an agreement between DWD and Dynegy for use of
the cooling water outfall was still subject to negotiation among the parties.
!.2.B         Feed Water CharacteriEation
DWD has a buoy in the area of the proposed intake collecting data on salinity, temperature and
turbidity at fixed intervals. Comprehensive analytical data is not available at this time. DWD
has retained Tenera Environmental to conduct a 12 month study on impingement and
entrainment issues. Sampling in support of the study is ongoing. Tenera did conduct a
preliminary analysis based on available information and a proposed intake flow of 25 mgd. That
report found low projected levels of entrainment. However, additional more detailed analyses
are required based on site specific data; in particular to assess the presence of a large, vertical
mixing zone at the interface of the submarine canyon in the bay13.
!.2.6         Guality of Pro'ect Information
Available documentation for the DWD project is adequate at this stage of project development.
DWD has not yet progressed with their formation of a joint powers authority (JPA) for project
implementation and production of environmental permitting packages. Information collected to
data has largely been in service of defining the project approach, securing agreements, and
developing project cost estimates. The nature of the agreement between DWD and Dynegy is
still confidential between the parties.


12
 DWD Response to SPI Questions, September 8, 2012.
13
 Tenera Environmental, Preliminary Modeling of Potential Impacts from Operation of a Desalination Facility
Ocean Intake, August 22, 2012.


Page 3-8                                        December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                     PROJECT FUNCTION


A listing of documents provided in addition to the response to the TAC is as follows:
      !     Product Water Pipeline Alignment
      !     Intake Pipeline Hydraulic Grade Line
      !     Draft Design Criteria
      !     Tenera – Preliminary Intake Assessment
      !     Conductivity, Temperature and Turbidity Data May 30 – June 12, 2012.
      !     Raw Water Characterization Program Memo
      !     Capital and O&M Cost Estimate Worksheets
      !     Site Layout for Capurro Ranch
      !     Presentation: An Oceanographic Solution to Product Freshwater, August 2012
Overall the information is considered sufficient to evaluate the proposed project from a technical
and economic perspective.


!.2.7        Omissions or Fatal FlaJs
We have not identified any fatal flows of a technical nature with the DWD proposed system.
The only omissions of information are acknowledged by DWD and related to the agreements
between DWD and Dynegy.


]L]       "&$"B&) +$)) B,\Q-\g ="+B>
!.!.1        Pro'ect Purpose
PML proposes a project that could serve the defined demand within the Cal-Am service area for
a desal supply of either 5,500 AFY or 9,000 AFY.


!.!.2        Customers Identified
PML seeks to supply either 5,500 AFY or 9,000 AFY to Cal-Am. Supply to other customers is
not proposed.


!.!.!        Ade8uacy of Treatment Approach
PML proposes two plant design capacities to meet the 5,500 AFY and 9,000 AFY delivery
targets—4.8 mgd and 9.1 mgd. Each of these capacities is different than the Cal-Am listed flows
of 5.4 mgd and 9.0 mgd, respectively. The difference results from their targeting deliveries of
5,000 AFY and 10,000 AFY in their response to the TAC and subsequent information provided
to SPI.
PML proposes to use an existing seawater intake system originally installed to serve the Kaiser
Refractories Moss Landing Magnesia Plant back in 1968—the same site that is now called the
Moss Landing Commercial Park (MLCP). The pump station draws from the Moss Landing


                                            December 2012                                 Page 3-9
PROJECT FUNCTION                                          MONTEREY PENINSULA REGIONAL WATER AUTHORITY


Harbor and supplies water to the site through two 36-in diameter pipelines that cross beneath
Hwy. 1 through a pair of 72-in corrugated steel conduits. One of the pipelines has been
upgraded to steel throughout its length; while the second maintains a section of the original wood
staved piping on site. Proponents have also indicated the ability to repurpose the existing site
seawater outfall as dual intake-outfall conduit extending into the Monterey Bay out front of Moss
Landing Harbor. The existing concrete outfall is 51-in internal diameter; and could have a new
intake line installed in the annular space; with brine flowing out in the opposite direction. Cost
estimates provided to SPI were based on use of the existing intake system so this approach forms
the basis of our evaluation.
The 1968 drawings show the installation of seven pumps. The condition of the pumps at this
time is unknown; but would likely require rehabilitation and rework to supply the proposed
treatment plant. The pump bowls reportedly draw from below the harbor seafloor, but the actual
depth is unknown.
The MLCP site still contains infrastructure from the time it was employed as a magnesium
extraction facility. The total site occupies roughly 200 acres; with a proposed 25 acre parcel
offered for sale or lease as part of the proposed desal treatment plant. Available facilities offered
for use include the following:
     !      Intake pumps and pipeline and outfall pipeline.
     !      Up to four 5.0 MG concrete storage tanks.
     !      A 12kV, 12,000 amp electrical service along with two 1,000 amp engine generators.
     !      Rail transportation terminal.
     !      Non-exclusive easements for site access.
     !      Non-exclusive use of a 2,100 gpm well supply source.
     !      A 5,000 gpd trailer-mounted pilot plant.
     !      Up to 20,000 sq. ft. of existing buildings.
Existing infrastructure is in various states of repair as detailed in two site investigations14,15and
would require some refurbishment and rework to be acceptable for integration into a municipal
drinking water facility. Portions of the site are likewise located within the flood plain16 and
constructed facilities would need to be built in accordance with any ensuing requirements.
The proposed PML treatment system would include inlet screens, booster pumps, single stage
pressure filters, an ultrafiltration (UF) membrane treatment system, antiscalant dosing system,
high pressure booster pumps with pressure exchange type ERDs, single pass RO system, post-
treatment system, and product storage and distribution pump station. The RO system would
operate at 40 percent recovery and limit operating flux to 8 gfd. The UF system would operate at
a proposed flux of 35 gfd.


14
   Replacement Cost Approaisal Summary Report, prepared by Landmark Realty Analysts, Inc., October 3, 2011.
15
   Structural Evaluation, Intake & Outfall Pipelines, Intake Pump Station and Water Storage Reservoirs, The
People’s Moss Landing Water Desalination Project, Moss Landing Green Commercial Park, Modd Landing, CA,
August 14, 2012.
16
   Monterey County Planning & Building Inspection Department; Meeting September 30, 2004, Agenda Item 6.


Page 3-10                                       December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                                PROJECT FUNCTION


The product water from the RO system would be post-treated with calcite and carbon dioxide for
stabilization, along with addition of a corrosion inhibitor. For disinfection, the product would be
dosed with sodium hypochlorite and stored in existing tankage on site.

PML did not provide a detailed list of equipment or a site layout plan, stating that it was too early
in the development of their project to have that information developed. It is therefore somewhat
difficult to gauge the robustness of their approach. From the narrative description provided and
listed membrane area assumptions, it is not clear that the major UF and RO train equipment
contain redundant process units.
From a process perspective, the proposed pretreatment system design may be acceptable. The
largest unknown is the quality of water that will be extracted from the Moss Landing Harbor.
There could be organics, metals and other contaminants entrained in the sediments overlaying
the supply pumps that could complicate treatment. PML has proposed conducting a pilot study
program prior to finalizing their process design, so this should help allay concerns. A previous
pilot study conducted at MLPP found that direct UF pretreatment operated in concert with a
coagulant was effective at pretreating a supply drawn from the Moss Landing Harbor, but that
flux should be limited to 30 gfd17.
A larger concern is with the RO system process design as a single pass system similar to the
DWD approach. As stated in that discussion, we recommend including a partial second pass RO
treatment system to produce a final product quality more in keeping with current supplies in the
distribution system.


!.!.4         Residuals Handling
Pretreatment residuals would come from the proposed filters and UF process units. A backwash
recovery system is proposed, with decant sent to the outfall with the RO system brine stream.
Neutralized UF and RO cleaning wastes would be treated similarly; or recovered for reuse within
the MLCP. Brine would be discharged to the existing outfall.
The outfall is currently not in use and there is evidence of disrepair in a video survey conducted
sometime prior to 200818 . The video shows evidence of several areas of decoupling along the
main outfall alignment. Also, according to the original plans, the outfall was installed below
grade until the diffuser section19. However, portions of the main outfall appear to be currently
uncovered; and one section shifted up—possibly as a consequence of the 1989 Loma Prieta
earthquake. Many of the diffusers are clogged and covered with marine growth; and from the
terminus of the outfall it appears it may be largely filled with sand—up to half of the
circumference. Consequently a fair amount of rehabilitative work would be required to place the
outfall into service, and more detailed assessment—including an inspection of the interior of the
outfall—is warranted.



17
   Coastal Water Project Pilot Plant Report, May 2010, MWH.
18
   Outfall Video, Moss Landing Marine Lab, California State University.
19
   Seawater Outfall for Kaiser Aluminum and Chemical Corporation, Moss Landing, California, by Kaiser
Engineers, 1971.


                                                December 2012                                           Page 3-11
PROJECT FUNCTION                                    MONTEREY PENINSULA REGIONAL WATER AUTHORITY


!.!.B        Feed Water CharacteriEation
PML does not at this point have analytical data characterizing the proposed raw water supply. It
will presumably be collected during their planned pilot test program.


!.!.6        Guality of Pro'ect Information
The PML project is the least developed among the three as evidenced by the level of information
provided. They were however very forthcoming in sharing all that was available, including
original construction plans for the intake and outfall, video survey of the outfall, and other site
specific reports.
A listing of documents provided in addition to the response to the TAC is as follows:
    !       Construction Plans: Seawater Outfall
    !       Construction Plans: Relocation of Sea Water Intake
    !       The People’s Moss Landing Water Desal Project, Important New Updates, July 2012
    !       Response to SPI Questions, September 4, 2012 and September 27, 2012
    !       Environmental Issues and Constraints Report, SMB Environmental, September 2012
    !       Structural Evaluation, JAMSE Engineering Inc., August 2012.
    !       Replacement Cost Appraisal Summary Report, Landmark Realty Analysts, Inc.,
            October 2011.
    !       Adopted Waste Discharge Requirements Order No. R3-2009-002, National Pollutant
            Discharge Elimination System (NPDES) Permit No. CA0007005 – Moss Landing
            Commercial Park and Moss Landing Cement Company, Moss Landing Cement
            Company Facility, Monterey County, March 2009.
Overall, the lack of specificity as to the proposed plant facilities makes the technical and
economic evaluation difficult and forces us to make additional assumptions on our own.


!.!.7        Omissions or Fatal FlaJs
We have not identified any fatal flows of a technical nature with the PML proposed system. The
primary omission is the lack of defined lists of equipment in order to assist in validating cost
estimates.




Page 3-12                                  December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                  PROJECTED PERFORMANCE




Q ;,GP!#%!L(;!,IG,*+O#!(
This section discusses the following performance issues for each project:
      !     Plant design capacity
      !     Targeted product water quality
      !     Disinfection strategy
Plant design capacity refers to the proposed instantaneous flow achieved by a given plant design
to achieve the annual produced water flow of 9,000 AFY or 5,500 AFY. The design capacity of
a facility impacts both its construction and operating cost, and must take account of issues such
as equipment redundancy, periodic maintenance, and overall online operating factor.
The issue of product water quality is closely tied to the proposed demineralization system
process design of each facility. As discussed previously, DWD and PML have proposed single
pass RO systems; while Cal-Am has proposed a partial (40 percent) second pass system. The two
approaches will produce different qualities of final product water from an overall salinity
perspective, as well as levels of boron and chloride.
In addition to salinity and individual constituent targets, the design must also achieve regulatory
pathogen removal thresholds. The California Department of Public Health (CDPH) has primacy
to regulate public water systems within the State. As such, they will review these proposed
treatment approaches for compliance with the Surface Water Treatment Rule (SWTR) and the
Long Term 2 Enhanced Surface Water Treatment Rule. It is anticipated the slant wells proposed
for the Cal-Am project would be deemed groundwater under the influence of surface water and
subject to the surface water regulations, as would the open intake sources for DWD and PML.
Pathogen removal/inactivation requirements are quantified in increments of influent to effluent
concentration, expressed in a log scale. For example 3-log removal is 99.9%. CDPH will
establish the log removal requirements of a project based on information on the quality of the
source water and other factors. The expected ranges of possible requirements for these projects
are 3-5 for Giardia; 2-4 for cryptosporidium (crypto); 4-6 for virus. Some project proponents
have indicated an expectation the requirements will fall at the low end of the ranges.
Each treatment process is assigned a log removal credit for each pathogen. By summing the
credits of all processes in the multi-barrier approach (filters, RO, disinfection, etc.) a total credit
is achieved to meet or exceed the regulatory requirement. Under the disinfection strategy
discussion we consider the removal credits likely achieved by the proposed projects.

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4.1.1        Plant Design Capacity
Defined demand requirements for the proposed supply to the Monterey Peninsula customers are
5,500 AFY and 9,000 AFY. Plant designs are rated in instantaneous production capacities for
the purposes of sizing equipment (pumps, RO membrane trains, etc.) in units of mgd. 1.0 mgd is
equivalent to annual production rate of 1,120 AFY. The required minimum plant capacity would
therefore translate to 4.9 mgd or 8.0 mgd. This however is not necessarily what we would
recommend as a conservative municipal plant design basis. Equipment breaks down, membranes


                                             December 2012                                     Page 4-1
PROJECTED PERFORMANCE                                  MONTEREY PENINSULA REGIONAL WATER AUTHORITY


require cleaning, power outages occur. Without excess treatment capacity or high levels of
component redundancy, annual deliveries could fall short.
Cal-Am has proposed a design capacity basis of 5.4 mgd or 9.0 mgd. These capacities are fairly
close to what you would get by assuming the treatment plant is on-line and producing water 90
percent of the time, which results in capacities of 5.45 mgd and 8.92 mgd. A 90 percent on-line
factor is consistent in our experience of a well-designed and operated municipal RO plant that
does not have redundant process units (e.g., RO trains). In Cal-Am’s case, they are proposing
redundant process units, so it’s likely the facility will be capable of producing its nameplate
capacity of 5.4 mgd or 9.0 mgd better than 90 percent of the time.
An additional issue specific to Cal-Am however is the potential extraction and return of
groundwater from the SVGB. Cal-Am estimates as much as 8 percent of the plant’s annual
production capacity may need to be returned to the basin—up to 780 AFY for the 9,000 AFY
demand scenario20. This has the effect of increasing the annual flow requirement to 5,960 AFY
or 9,780 AFY; and corresponding minimum plant design capacity to 5.3 mgd or 8.7 mgd.
Looked at another way, the plant would need to run at the proposed design capacity roughly 98
percent of the time to meet the higher delivery requirement. With the level or redundancy in Cal-
Am’s design we consider this achievable but not overly conservative.


4.1.2        Targeted Product Water Guality
Though Cal-Am has produced a good degree of information to date with regard to their proposed
project, the majority has been in service of supporting their CEQA and CPUC approval
processes. They have specifically not developed a target product water quality specification,
beyond stating the final product water will meet all State Maximum Contaminant Levels (MCLs)
and be non-corrosive. Rational for a partial second pass RO system includes concerns over
levels of boron, chloride and sodium in the final product water as well20. Also in a presentation,
Cal-Am projected treated water TDS from the plant of 380 mg/L and chloride level of 60 mg/L
to blend with existing supplies with a TDS of 440 mg/L and chloride level of 90 mg/L21.
From their proposed process design and post-treatment strategy we can however model projected
product quality independently. In Table 4-1 we have summarized our projection of water
quality produced from a partial two-pass RO process (40 percent blend of second pass product)
stabilized with calcite, carbon dioxide and sodium hydroxide.




20
 RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Project Description, April 20, 2012..
21
 Presentation – Monterey Peninsula Water Supply Project – Presentation to Monterey Co. Water Resources
Agency, June 25, 2012.


Page 4-2                                     December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                      PROJECTED PERFORMANCE


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4.1.!           Disinfection Strategy
Cal-Am has stated their intent for their pathogen removal credits to comply with the Surface
Water Treatment Rule (SWTR) and achieve 4 log removal of giardia and 6 log removal of virus.
This would be accomplished through a multi-barrier treatment approach including their intake
wells, pretreatment filters, RO process, chlorine disinfection, and (if required) UV disinfection.
Our evaluation of the proposed Cal-Am process in terms of specific pathogen credits is presented
in Table 4-2. The ability of Cal-Am’s slant-wells to receive aquifer (bank) filtration credit is
uncertain (dependent on design and local conditions) and the inclusion of UV disinfection is
tentative, totals were calculated with and without those values.


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                                                  December 2012                                   Page 4-3
PROJECTED PERFORMANCE                                  MONTEREY PENINSULA REGIONAL WATER AUTHORITY


CLT        Q&&"9,(&# Q&),B =Q9Q>
4.2.1           Plant Design Capacity
The original DWD response to the TAC included proposed demand conditions of 25,000 AFY
and 10,700 AFY, with plant capacities of 22.3 mgd and 9.1 mgd. In response to questions from
SPI, DWD proposed to meet the 9,000 AFY condition with their original 9.1 mgd plant capacity,
and the 5,500 AFY condition with a plant rated at 4.9 mgd.
Using the same performance metrics discussed above for Cal-Am, the DWD facility would need
to operate at an online factor of roughly 100 percent for the 5,500 AFY demand condition; and
88 percent for the 9,000 AFY scenario. It’s unclear why DWD used varying assumptions for
each condition, but could be a consequence of their larger, regional facility approach and an
assumption that the 5,500 AFY supply would be served as a portion of a larger capacity
treatment plant.
Like Cal-Am, DWD includes sufficient redundancy in their proposed treatment system
equipment to justify a greater than 90 percent online factor. On an equivalent basis with Cal-
Am, a 98 percent online factor would result in plant capacities of and 5.0 mgd and 8.2 mgd,
respectively.


4.2.2           Targeted Product Water Guality
In their response to questions from SPI, DWD provided their target product water quality which
is reproduced in Table 4-3. In general, DWD proposes to provide a product supply that is
compliant with all applicable drinking water regulations, is non-corrosive, and compatible with
existing supplies in the Cal-Am distribution system.


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Due to their proposed warming process, the product water will also likely have a temperature
between 29 – 34 ºC (84 – 93 ºF). This may be excessive depending on the temperature of
existing supplies within the Cal-Am distribution system, temperature loss during transmission
and their ability to blend and lower the delivered temperature to customers.



Page 4-4                                      December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                  PROJECTED PERFORMANCE


4.2.!         Disinfection Strategy
DWD will achieve required disinfection and pathogen removal credits though media filtration,
RO, and chlorine disinfection. We project the overall process to achieve overall requirements as
summarized in Table 4-4.


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4.!.1         Plant Design Capacity
The PML response to the TAC included proposed demand conditions of 5,500 AFY and 10,700
AFY, with plant capacities of 4.8 mgd and 9.4 mgd. In response to questions from SPI, PML
proposed new capacity increments of 5,000 AFY and 10,000 AFY. Corresponding production
capacities were not provided, though a narrative equipment list with design operating flux and
membrane area and element assumptions were provided for each scenario. From this
information, we calculated a plant design capacities of 4.5 mgd and 9.0 mgd—roughly
equivalent to producing 5,000 AFY or 10,000 AFY if operated continuously (100 percent online
factor). Actual target delivery scenarios for the peninsula are 5,500 AFY and 9,000 AFY.
From the equipment information provided it does not appear that any excess membrane area is
proposed that would indicate the presence of redundant equipment. With this approach, a lower
assumption of achievable plant online factor would be recommended. However, we do not
consider the approach good design practice and find it at odds with proposed systems from the
other candidate proponents. We have therefore evaluated the PML system in our analysis of
having redundant process units and therefore an equivalent system design capacity to DWD of
either 5.0 mgd or 8.2 mgd.


4.!.2         Targeted Product Water Guality
PML provided their target RO product water quality in a response to SPI, which is reproduced in
Table 4-5Table 4-3. Included in the response was a statement that final product quality has not
been established, but would meet all requirements stipulated in U.S. EPA drinking water
standards.



                                             December 2012                                  Page 4-5
PROJECTED PERFORMANCE                                                                MONTEREY PENINSULA REGIONAL WATER AUTHORITY




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           1Listed quality is projected permeate from the RO system, prior to final stabilization and pH adjustment.




4.!.!               Disinfection Strategy
With their currently proposed pretreatment strategy, sufficient log removal credits for giardia,
crypto and virus should be achievable. One unknown however is the level of organics that may
be present in the harbor-extracted supply; and the potential to create disinfection byproducts.
This issue should be explored in the planned pilot test program, which will also be used to
finalize the proposed process design and disinfection strategy. Our evaluation results are
presented in Table 4-6.


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Page 4-6                                                              December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                            ECONOMICS




R !#GOG*&#)(
In our original project scoping technical memorandum2 we recommended the following criteria
to evaluate the candidate projects on an equivalent basis:

   !       Uniformity in plant design capacity for the two non-regional approaches; equivalent
           capacity allocation for the proposed DWD regional project.
   !       Equivalency in treatment to achieve: a common RO feed water quality following
           pretreatment; a common treated water quality goal; and pathogen removal credits
           required for the applicable supply source.
   !       Uniformity in equipment redundancy.
   !       Uniformity in unit cost criteria for common items.
   !       Uniformity in cost factors applied to aggregated costs (e.g., contingencies; electrical
           and I&C costs; etc.).
   !       Uniformity in unit costs for chemicals and other consumables for treatment
           evaluations.
We accomplished implementing the above principles in large measure in our economic
evaluation. We adjusted plant capacities for the evaluation on the basis described in Section 4,
rating Cal-Am’s proposed system at design capacities of 5.4 mgd and 9.0 mgd; and the DWD
and PML systems at 5.0 mgd and 8.2 mgd. In terms of treatment process, we attempted to
maintain the overall proposed process design of the proponents, but did evaluate all as including
a partial (40 percent) capacity second pass RO system. We also assumed N+1 redundancy on all
rotating equipment and major treatment process units (e.g., filters, RO membrane trains). We
employed an equivalent basis in developing our capital equipment cost estimates, relying on
targeted quotes for equipment and SPIs cost information from past, similar seawater RO projects.
For indirect costs, we assumed fixed factors and applied them uniformly to each project. Each
factor, expressed as a percentage, was applied to estimated plant construction cost, absent costs
associated with off-site trenched pipelines. These factors included the following:
   1. Implementation Costs at 25 percent, to include items such as permitting, pre-construction
      design services, procurement development, and compliance activities.
   2. Mobilization/Demobilization costs at 2 percent to account for supply and removal of
      contractor equipment to the facility during construction.
   3. Electrical and I&C Systems cost at 18 percent, accounting primarily for post-service
      switchgear, motor control centers, drives, conduits, wire and SCADA systems.
   4. Engineering and Startup cost at 15 percent, to include contractor engineering, overhead,
      profit and commissioning expenses.
In addition, specific allowances were made to account for offsite right-of-way, easement and
land acquisition costs, to cover items such as roadway repair, rehabilitation and replacement,
separate from pipeline construction costs. These were applied at $80/LF for offsite trenched
pipelines, in the absence of more specific proponent developed estimates. Similarly, additional


                                          December 2012                                   Page 5-1
ECONOMICS                                                MONTEREY PENINSULA REGIONAL WATER AUTHORITY


project specific costs were applied as applicable for things like annual property lease and
administrative payments and pilot testing.
In addition to indirect costs, final contingency and mitigation allowances were applied. For
contingency, we recommend a value of 30 percent at this stage of project development. While
some proponent projects have more project definition than others at this stage, we find
significant risk elements for each that warrant this level of conservatism. For mitigation, we’ve
applied a 1 percent allowance to the overall project cost. As no project has advanced to the stage
where a mitigation plan is in place, we consider it prudent to consider a pro-forma allowance at
this time.
Capital facilities costs have been aggregated into the following seven categories for presentation:
    1. Intake/Outfall Facilities–includes costs associated with intake wells and pump stations
       along with corresponding facilities associated with brine disposal.
    2. Pretreatment and Residuals Handling – includes facilities for the pretreatment of seawater
       ahead of the RO system, including filters, chemical feed systems, storage tanks and
       related facilities associated with the treatment and disposal of any residuals.
    3. Desalination System – covers the RO membrane trains, high pressure feed pumps, energy
       recovery devices, and membrane cleaning system.
    4. Post-Treatment – includes product stabilization systems and disinfection processes.
    5. Distribution Facilities – includes treated water storage and pumping systems.
    6. Site Structures – includes buildings, roads, landscaping, site fencing and other structures.
    7. Offsite Trenched Pipelines – Includes all supply, product and brine disposal pipelines.
       Product pipelines were estimated to a common terminus in Seaside at the existing Cal-
       Am meter location.
For annual operating costs and other expenses we implemented a similar approach. Chemical
unit prices were standardized across our estimates as listed in Table 5-1.
                            %./01(R23(4()566.78(9:(#K16C?.0($FC@(;7C?1=(


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                '.22.54./ -/J4H40.2                                  aPL[PU7H



Page 5-2                                        December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                            ECONOMICS


The rates were primarily based on Cal-Am’s response to SPI’s questions, though we did use the
DWD unit prices for sodium bisulfite. Cal-Am’s listed price for sodium bisulfite ($2.70/lb)
seemed high and was significantly above other pricing on this chemical that we have seen.
In terms of chemical application rates/dosages, we primarily maintained the rates proposed by
the individual proponents, unless we found a process-specific reason to adjust them.
Similar to the capital cost estimates, annual operating and maintenance (O&M) costs were
aggregated for presentation into four main categories—Energy, Chemicals, Expendables, and
Other. Each facility was assumed to operate full time (365 days per year). Energy costs were
developed by estimating loads and efficiencies of motorized equipment items and assigning an
electrical unit cost. Cal-Am provided variable summer and winter electrical rates from PG&E at
an average annual cost of $0.131/kW-hr. The other two projects in the Moss Landing area
proposed rates of $0.08/kW-hr. We were not able to disprove any of the listed rate assumptions
and therefore left them as stated by the individual proponents for the purposes of our evaluation.
The expendables category includes replaceable media for filters (including MF/UF) and RO
process membranes. Equivalent unit costs were used for MF/UF process membranes ($1,000 per
module), cartridge filter elements ($16 per 40-in cartridge), and RO membrane elements ($500
per element). Both MF/UF and RO process membranes were assumed to have a 5-year life.
The Other category lists separately operations and maintenance labor and equipment replacement
costs. Cal-Am provided the most detailed estimate of operation and maintenance labor
requirements and costs, which were therefore applied equally across the three projects. It is
reasonable to assume at this point that any of the candidate facilities would be operated by a
contract operations group with a similar pricing structure.
For an equipment replacement allowance, we instituted a common factor of 1.5 percent of the
complete system cost (including offsite trenched pipelines but prior to application of indirect
costs, contingencies, and mitigation allowances) as an annual expense.
The results of our evaluation are presented in Table 5-2 on the following page. The table
summarizes our assessment of the relative cost of each project on the common evaluation criteria
described above. Based on the information used in its preparation and our overall scope of
evaluation, we would consider it a Class 5 estimate as defined by the Association for
Advancement of Cost Engineering (AACE), having an accuracy range of -30 to +50 percent.
The AACE defines the use of Class 5 estimates as focused on conceptual screening of
alternatives. In the context of this project, we consider the costs useful for a comparison of the
various proponent projects among themselves, as the costs were developed on an equivalent
basis. The overall level of project development and the scope of our evaluation do not warrant
the costs to be used on a stand-alone basis as a reliable indication of future construction and
operating costs.




                                          December 2012                                   Page 5-3
ECONOMICS                                                                              MONTEREY PENINSULA REGIONAL WATER AUTHORITY


                       %./01(R2D(4()566.78(9:(!E.05.@1>(#.<C@.0(.F>(G<17.@CFH(#9=@(!=@C6.@1=(

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  1Includes implementation costs at 25%; ROW easement/land costs, mobilization/demobilization at 2%; electrical and I&C systems at 18%; engineering and
      startup at 15%; and additional project proponent prescribed costs. All percentages applied to plant facilities costs.
  2 Calculated as 1.5% of plant facilities costs.
  3   Capital recovery factor for DWD and PML based on an interest rate of 4.0% and term of 30 years; based on an interest rate of 8.49% and 30 years for
      Cal-Am.




Page 5-4                                                                 December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                             ECONOMICS




A Capital Recovery Factor (CRF) is used to convert a single up-front capital cost into an annual
amount to be recovered, as if the money was repaid as a loan, based on an interest rate and time
period. As listed in Note 3 on Table 5-2, a CRF was used for the DWD and PML projects at an
interest rate of 4.0 percent. This rate approximates the cost of tax-exempt borrowing for publicly
financed projects which would likely be applicable to DWD and PML. In this case, the CRF
equals 0.05783
Cal-Am may not have access to public financing and could have a pre-tax weighted cost of
capital based on 5.0 percent market-rate debt (their authorized debt return is 6.63%) and 9.99%
percent equity return, grossed up for income and ad valorem taxes. This would result in higher
annual costs for Cal-Am than shown. However, there are additional differences in how public
versus private capital investments are amortized, the impacts of which are not analyzed in this
report. The Monterey Peninsula Water Management District has computed that for Cal-Am, a
CRF representing the average annual capital recovery over a 30-year period equals 0.92933
which would result as if the interest rate was 8.49%. This CRF is computed as follows:
{[(Pre-Tax Equity Return: 9.99% x 53% x 1.69 gross-up) +(Pre-Tax Debt Return: 5% x 47% x
1.69)-(Interest Paid Tax Off-Set: 5% x 40.25% effective tax rate divided by .99736 collectibles
rate)] +(Ad Valorem Taxes: 1.05%)]}/2 + (3.33% annual depreciation) = 0.092933 proxy CRF.
Specific additional considerations related to the costs for each project are provided below.

NLW     ',B-R$#\-, ,+&#-',\ 9,(&# =',BA,+>
A summary of our estimate of capital system costs to that provided by Cal-Am is provided in
Table 5-3. For the most part, the two estimates align fairly closely. A discussion of individual
elements is presented below.
We found general agreement with Cal-Am’s proposed costs for components of their proposed
intake and outfall systems. The slant well installation cost is in line with estimates we’ve seen
elsewhere; and the corresponding pipeline estimates are very detailed for this level of project
development. For the pretreatment and residuals handling systems, we found generally close
agreement—but did independently adjust costs for the pressure media filters based on an
equipment quotation we received. We also provided relatively minor adjustments to their
allowances for interconnecting piping, cartridge filters and chemical addition systems. For the
desalting system equipment, we priced components of the energy recovery system (isobaric
pressure exchangers and booster pumps) based on specific quotes from the manufacturer; and
priced the RO trains according to our own cost models similar to the other projects to provide a
consistent basis. We also developed our own estimates for the post-treatment system equipment.
For indirect costs, we did not find anything particularly objectionable; but did price factor-based
costs on the common percentage basis we established. Their cost for land and right-of-way
easements was found to be very detailed and comprehensive.




                                           December 2012                                       Page 5-5
ECONOMICS                                                                             MONTEREY PENINSULA REGIONAL WATER AUTHORITY


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     1 All costs are presented in millions of 2012 dollars.
     2 Plant facilities costs include the System Subtotal, less off site trenched pipelines.
     3 Listed percent-cost factors apply only to the SPI developed cost estimates. Indirect costs, contingency, and mitigation allowances shown under
       the Cal-Am estimates were provided by them and are presented accordingly without adjustment.
     4 The listed subtotal includes both the sum of Indirect Costs and the System Subtotal.


Overall, the relatively high cost of the Cal-Am system is most directly tied to the cost of their
proposed intake system; while DWD and PWM have proposed relatively low cost alternatives.
Our corresponding operating cost estimates are provided in Table 5-4.




Page 5-6                                                               December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                                                       ECONOMICS


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      $0J12
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      1   All costs are presented in millions of 2012 dollars.

In our estimate we adjusted some assumed operating efficiencies of centrifugal pumps and
motors from 80 percent to 75 percent; increasing costs somewhat. However, we decreased the
projected average operating pressure of the first pass RO membrane feed pumps and energy
recovery booster pumps based on projected operating conditions and water temperature. This
had the effect of lowering our overall energy estimate from that provided by Cal-Am. Our
chemical cost estimate is likewise lower, owing primarily to our lower unit cost factor for
sodium bisulfite.
Overall, Cal-Am’s projected O&M cost is among the highest of the estimates for the three
proponent projects—a consequence of their higher energy cost directly tied to their more than 60
percent higher electrical rate. At an equivalent industrial rate of $0.08/kW-hr, annual energy
cost in our estimates would drop to $3.28 million/$2.00 million under each capacity alternative.

NLT           Q&&"9,(&# Q&),B =Q9Q>
We have summarized our estimated capital cost of the DWD treatment facility in relation to
costs prepared by DWD in Table 5-5.




                                                                    December 2012                                     Page 5-7
ECONOMICS                                                                             MONTEREY PENINSULA REGIONAL WATER AUTHORITY


                                    %./01(R2R(4()566.78(9:(LAL(#.<C@.0(#9=@(!E.05.@C9F(

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    -/G421<0 '.505]
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      #$9F &851@1/0 8/G B8/G '.505                                           APA                 APA              aNLD[                aNLD[
      +.H474l804./UQ1@.H474l804./ =Td .? "R>                                aPLbb               aPLCb             aPLb[                aPLND
      &71<024<87F -c' )3501@5 =W[d .? "R>                                   aDLW[               a]Lbb             abLPC                aNLPW
      &/K4/1124/KU)08206: =WNd .? "R>                                       aOLTb               aNLDN             aNL[b                aCLW[
      ,GG404./87 "2.:./1/0 "215<24H1G '.505                                 aW[L]               aWNLW             aW[L]                aWNLW
                                                    )6H0.087C               aWTb                aOOLP             aWTT                  aWPT

    './04/K1/<3 ,77.I8/<1 =]Pd>]                                            aOLTb               aNLDN             a]DLD                a]PL[

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                                                         ($(,B              aW]D                aWPN              aWDP                  aW]C
     1 All costs are presented in millions of 2012 dollars.
     2 Plant facilities costs include the System Subtotal, less off site trenched pipelines.
     3 Listed percent-cost factors apply only to the SPI developed cost estimates. Indirect costs, contingency, and mitigation allowances shown under
       the DWD estimates were provided by them and are presented accordingly without adjustment.
     4 The listed subtotal includes both the sum of Indirect Costs and the System Subtotal.


The increased cost of our estimate is largely due to the addition of a 40 percent capacity second
pass RO system to their facility. We also increased cost of the intake and other trenched offsite
pipelines to account for tunneling beneath the Elkhorn Slough at $1,500/LF. Crossing the slough
will likely be difficult and may have a higher cost, but we lack information to at this stage of
assessment to provide a more detailed analysis. DWD also appeared to use higher unit cost and
installation factors than we employed; but then a comparatively low contingency allowance of 12
percent.
It is also worth considering that the proposed DWD facility is a regional project with a build out
capacity of 25,000 AFY. Intake and brine disposal pipelines are sized for the ultimate plant
capacity; and the totals listed in the DWD and SPI estimates for these items as well as site
facilities represent a flow based proration. DWD also prorated equipment costs for the 5,500


Page 5-8                                                               December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                                                   ECONOMICS


AFY plant alternative off their costs developed for the 9,000 AFY plant (9.1 mgd capacity);
while we developed separate equipment and facilities estimate for the 5.0 mgd and 8.2 mgd plant
sizes.
Lastly, the DWD cost for the intake system is limited to the pipeline from MLPP to the Capurro
Ranch site. Specifically omitted are the new 48-in deep water intake pipeline, modifications to
the MLPP intake pump station, and the proprietary warming system equipment. According to
DWD, the costs for these facilities will be borne by a separate entity/project and provided to
DWD for use as part of the regional desalination facility, subject to an annual lease (accounted
for in the O&M cost estimate). This accounting is largely the reason for the low capital cost
associated with the DWD in relation to the Cal-Am and PML projects. It does however result in
a higher O&M cost, summarized in Table 5-6.


                                    %./01(R2S(4()566.78(9:(LAL(GT*(#9=@(!E.05.@C9F(

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    'J1@4<875                                                     aPLCb            aPLT[     aPL[W        aPLCO

    &e:1/G8H715                                                   aWL]W            aPL[O     aWLPT        aPLD[
    $0J12
     $0J12 "2.:./1/0 &e:1/515                                     aWLNO            aWLCN     aWLNO        aWLCN
     $:12804./5 c +84/01/8/<1 B8H.2                               aTL]D            aWLC]     aTLDO        aTL]D
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                                                        ($(,B     aOL]C            aDL]W     aWPLD        abLOC
    1 All costs are presented in millions of 2012 dollars.


Overall we project a higher energy cost estimate for the DWD project based on an assumed
energy rate of $0.08/kW-hr throughout; where DWD appears to have used a $0.04/kW-hr rate for
some of their on-site facilities. The projected cost of chemicals is higher in our estimate as well,
as DWD omitted accounting for the cost of post-treatment chemicals in their estimate (calcite,
carbon dioxide and sodium hydroxide). Our cost of expendables however is reduced, based
largely on what appears to be a lower unit cost factor with the RO process membranes, even
including the additional membranes associated with the second pass RO system. Included in the
category of “Other Proponent Expenses” for DWD are the annual lease costs associated with
their plant site and intake facilities as well as annual profit. This category of expense has the
effect of raising their overall annual costs to be roughly equivalent to Cal-Am, even though their
costs for energy, chemicals and expendables are lower.




                                                                December 2012                                     Page 5-9
ECONOMICS                                                                              MONTEREY PENINSULA REGIONAL WATER AUTHORITY


NL]           "&$"B&) +$)) B,\Q-\g ="+B>
The results of our capital cost evaluation of the PML project are presented in Table 5-7.

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      ".50A(2180@1/0T                                                    )11 \.01 T             )11 \.01 T         aWLDD                aWLPb

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      )401 )026<06215                                                        aWPLP                abLPP            aWPLP                abLPP

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                                           )3501@ )6H0.087                   aOWLP                aDPLP            abbLT                aDWLP

                        "78/0 R8<4740415 ="R> )6H0.087]                      aDDLP                a]NLP            aNTLW                a]NLO
      -/G421<0 '.505C                                                      aCTLP                  aTWLP
        -@:71@1/0804./ '.505 =TNd .? "R>                                 )11 \.01 C             )11 \.01 C         aWOL]                aWOL]
        #$9F &851@1/0 8/G B8/G '.505                                                                               a]PLT                a]PLT
        +.H474l804./UQ1@.H474l804./ =Td .? "R>                                                                     aWLPC                aPLbT
        &71<024<87F -c' )3501@5 =W[d .? "R>                                                                        aOL][                aDLCb
        &/K4/1124/KU)08206: =WNd .? "R>                                                                            abL[T                aNL]O
        ,GG404./87 "2.:./1/0 "215<24H1G '.505                                                                      aPLTP                aPLTP
                                                     )6H0.087N               aW]]                 a[WLP            aWCN                  aWT]

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                                                          ($(,B              aW]]                 a[WLP            aWOP                  aWDW
      1 All costs are presented in millions of 2012 dollars.
      2 PML supplied costs for Pretreatment/Residuals Handling, Desalination System, and Post-Treatment were provided as a single lump sum and are
          presented here accordingly.
      3 Plant facilities costs include the System Subtotal, less off site trenched pipelines.
      4 Listed percent-cost factors apply only to the SPI developed cost estimates. Indirect costs, contingency, and mitigation allowances shown under
        the PML estimates were provided by them and are presented accordingly without adjustment.
      5 The listed subtotal includes both the sum of Indirect Costs and the System Subtotal.


PML presented their costs for the main treatment facilities as a lump sum number, making
comparison of individual equipment estimates impossible. That said, the respective totals
closely match. The disparity between the estimates at the 9,000AFY alternative is likely due to
the difference in system capacity assumed—9.4 mgd for PML 8.2 mgd in our estimate.




Page 5-10                                                               December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                                                   ECONOMICS


PML provided an allowance of $3.0 million for repair and upgrade to their existing intake pump
station and outfall pipeline. We have no basis at this stage to recommend a higher estimate, but
do note that a comprehensive evaluation of the current state of the outfall pipeline and attendant
repair requirements is not available at this time. It may be that when such evaluations are
conducted, the price could increase.
PML also provided single lump sum costs for indirect expenses, including project contingency
allowances. We find these allowances insufficient for a project at this stage of development with
significant undefined issues. PML still intends to validate their treatment approach through a
planned pilot testing program, making reliance on estimates prepared on the current process
design questionable. We also point out that the indirect and contingency allowances applied are
uniform across our evaluation for the three projects. PML does have a high cost associated with
ROW, land and easement allowances. This is a combination of the prescribed $25 million cost
of the MLCP 25-acre site and related facilities, along with a roughly $5 million dollar allowance
for ROW and easements associated with the product water pipeline.
Overall the PML facility capital costs fall in the middle of the three proponent projects; and
notably higher than the DWD estimate which shares comparatively low intake and outfall system
costs in comparison to Cal-Am. The primary reason for this is their expanded pretreatment
system, including both media filtration and MF/UF treatment to treat the supply extracted from
the Moss Landing harbor.
The results of the O&M cost evaluation are presented in Table 5-8.

                                     %./01(R2V(4()566.78(9:(;*N(GT*(#9=@(!E.05.@C9F(

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    'J1@4<875                                                     aWL]T            aPLDD     aPLO]        aPLNb

    &e:1/G8H715                                                   aPLbO            aPL]O     aWLPO        aPLDN
    $0J12
     $:12804./5 c +84/01/8/<1 B8H.2                               aPLOC            aPLOC     aTLDO        aTL]D
     &f64:@1/0 #1:78<1@1/0 =WLNd .? "R>                           aWL]]            aPL[W     aWLWD        aPLOT
                                                        ($(,B     a[L[C            aNLP]     aOL[N        aDLO]
    1 All costs presented in millions of 2012 dollars


.

Overall our estimates closely match those provided by PML; with any differences attributed
primarily to the differences in the 9,000 AFY plant design capacity assumption discussed above
along with the addition of a second pass RO system to their process. The projected operating
costs of the PML system are the lowest of the three proponents. The fact that they have
additional process equipment is reflected in their higher energy, chemical, and expendable
category expenses in relation to DWD. Those categories are higher than the comparable Cal-Am
costs as well, with the exception of energy. Though PML’s projected energy use is higher; their
lower cost of electricity results in a lower annual cost.


                                                                December 2012                                   Page 5-11
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                               IMPLEMENTATION CONSIDERATIONS




S &*;N!*!O%+%&GO(#GO)&L!,+%&GO)(
Each of the projects has been evaluated in terms of the major issues it faces for environmental
compliance and permitting, and the consequences for the development schedule. The evaluation
was performed at a very high level and based upon conceptual rules of thumb. In order to screen
the issues of significance, the prior Coastal Water Project EIR22 was reviewed and largely relied
upon to assess facts and mitigation strategies for environmental compliance. That document was
presumed to have identified the relevant permits for prior project approaches.
Based upon our judgment, the major differences between the three proposed projects and the
alternatives described in the Coastal Water Project EIR were assessed to determine the additional
major permits that would need to be obtained and the new environmental assessments that would
be necessary. Each of the project sponsors provided estimates of the schedule for
implementation including the estimated timing for environmental compliance and major permits.
The conceptual schedule and schedule risk identified by the Consultants were reviewed with the
project sponsors for comment in an effort to present consensus on the project schedule and risks.
Although the prior EIR identified more than 25 discretionary approvals which must be obtained
for the project alternatives, this review focused on a simplified list of discretionary approvals
based upon our judgment that these approvals would most likely dictate the critical path for
project development.
     !      Approvals related to intake of seawater
     !      Approvals related to project discharge
     !      Jurisdictional permitting for water of the U.S.
     !      Coastal Development Permitting
Moreover, a highly simplified list of tasks for environmental compliance was created around
these discretionary approvals. Those tasks in order:
1. A project description must be completed.
2. An Environmental Assessment must be made.
3. An EIR/EIS must be completed (CEQA/NEPA compliance).
4. Commercial Agreements must be negotiated/ Cal-Am must obtain a Certificate of Public
   Convenience and Necessity (CPCN), after certification of the EIR.
5. Jurisdictional Permits must be obtained for facilities impacting Waters of the U.S.
6. NPDES Permits must be amended/obtained.
7. Coastal Development Permits must be obtained.




22
  California American Water Company, Coastal Water Project, Final Environmental Impact Report, October 30,
2009


                                               December 2012                                         Page 6-1
IMPLEMENTATION CONSIDERATIONS                        MONTEREY PENINSULA REGIONAL WATER AUTHORITY


The prior EIR found that two methods of intake of seawater would not cause a significant impact
on the marine environment:
1. The use of a subsurface intake was presumed to cause no adverse impact to the marine
   environment.
2. The use of discharge from the MLPP would not cause an increased use of water from the
   marine environment, and thus would not cause an impact as long as the power plant
   continued to use once-through cooling.
The Prior EIR similarly found that there was no significant impact to the marine environment
under two proposed methods of brine discharge:
1. The blending of waste products (primarily waste brine) with the MLPP discharge would
   sufficiently dilute the discharge to avoid significant impacts.
2. The use of the MRWPCA ocean outfall would cause sufficient mixing of the waste brine and
   other products to avoid significant impacts.
With regard to financing risk as it applies to proceeding with at-risk design development
activities, we have not reviewed the extent to which the project sponsors have investors that are
willing to shoulder financial risks associated with development of the proposed desalination
projects. For any project to be successful there must be financial backing sufficient to pay
development expenses prior to the issuance of major permits and the execution of definitive
commercial agreements for project implementation.
We have developed project implementation schedules for the project based upon an assumption
that investors’ assessment of contingent risks would not delay logical development activities that
affect the critical path for project implementation. For example, it has been assumed that all of
the projects could proceed with preliminary design and definition of engineering parameters
through activities such as pilot testing prior to the issuance of major permits, even though there is
substantial financial risk to these endeavors. Thus the schedules could be overly optimistic when
considering these financial risks.
We have noted in the generic schedules herein that in addition to project review under CEQA
and NEPA, there are a number of discretionary approvals whose issuance may address issues
beyond those normally required for certification of these environmental documents. The State of
California created an Ocean Desalination Handbook which included policy guidance from the
California Coastal Commission and other State agencies to provide some guidance on the criteria
that would be used in discretionary review of projects. Similarly NOAA has issued policy
guidance regarding the process for obtaining discretionary approvals within the Marine
Sanctuary. Notably:
    !      The Coastal Commission will consider how effectively the project will “protect and
           enhance the marine environment”
    !      There is a strong preference among State and Federal agencies for sub-surface intake
           compared to open-water intake. Open water intakes must be demonstrably
           preferable.
    !      Review of environmental effects of the projects should include consideration of
           projects contemplated in the future and by others to ensure adequate evaluation of the



Page 6-2                                   December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                        IMPLEMENTATION CONSIDERATIONS


            potential cumulative impacts of projects. Mitigation/enhancement strategies should
            be coordinated and piecemeal approvals avoided.
      !     There is a preference for public ownership of ocean desalination projects compared to
            private ownership.
It is highly speculative and beyond the scope of this report to fully analyze how each of the
projects may manage gaining discretionary approvals. We offer some observations:
      !     A comparison must be made between the logical means of taking water from the
            marine environment to ensure that the selected method is preferred. It is to the
            schedule advantage of any project that all projects be fully evaluated.
      !     Comparison/evaluation of environmental impacts to the marine environment and the
            mitigation strategies should include consideration of future projects and cumulative
            impacts.
      !     Public stewardship and oversight should be detailed prior to review by the Coastal
            Commission.


DLW       ',B-R$#\-, ,+&#-',\ 9,(&# =',BA,+>
The implementation path for the Cal-Am proposal is very well defined. Moreover, the CPUC is
aggressively pushing forward implementation of the project. The CPUC has published a
schedule for completion of the EIR and CPCN for the project. Cal-Am has provided an
estimated schedule for implementation of the project following the CPCN.
The Notice of Preparation (NOP) issued by the CPUC indicates that a Subsequent EIR is being
prepared. Following Scoping Hearings on October 25 and 26, a “Scoping Report” will be
prepared describing the project and the project alternatives that will be considered in a Draft EIR
scheduled for circulation July 1, 2013. The Scoping Report will describe alternatives to the Cal-
Am project prior to the CPUC’s hearing testimony on the proposed CPCN. Hearings will be
concluded prior to the issuance of the Draft EIR. The Final EIR will be issued prior to final
approval of the CPCN. Although it is unusual for the administrative process for CPCN to
precede the issuance of at least a draft EIR, the CPUC found that it was not in the public’s
interest to delay the CPCN proceedings because it would risk non-compliance with the 2016
State imposed deadline to reduce diversions of Carmel River water.
The risks affecting the Cal-Am development schedule have been carefully evaluated and the
professionals working on compliance for Cal-Am and the CPUC are exceptionally capable.
Descriptions of contingent risk for the project should be viewed in a context that all development
options have unresolved risks, and that it is not possible to define a perfect path which balances
the competing objectives of all parties. Moreover, there are a number of legal uncertainties
related to the path of development that can be assessed but not resolved at this time.
One legal question regards the structure of commercial agreements for the desalination project.
The Cal-Am proposal depends upon the CPUC acting as lead agency for environmental review
which is apparently appropriate only when Cal-Am would own and operate the facilities of the
desalination project. As noted below, there are conceptual advantages to public ownership of the
assets for a project of this type, which may significantly enhance the prospects for political and


                                           December 2012                                   Page 6-3
IMPLEMENTATION CONSIDERATIONS                       MONTEREY PENINSULA REGIONAL WATER AUTHORITY


legal approvals necessary for the project to succeed. Thus there is something of a conundrum for
the MPRWA--the CPUC’s legal authority and sophistication to act as a lead agency for CEQA
creates a schedule advantage. Moreover, the simplicity of the commercial agreements when Cal-
Am owns all facilities creates schedule advantages in the CPCN administrative process, but that
ownership structure creates contingent risk and political opposition to the project which could
delay ultimate approval.
Separate from these political considerations, the primary risks for schedule delay appear to be
related to uncertainties for the development of slant wells as intake for the proposed project.
Those risks are further broken down:
1. There are questions regarding the legal right of Cal-Am to install and operate slant wells in
   the proposed locations.
    It appears that there are paths to resolve this issue through commercial agreements with other
    entities which do have a clear legal right to install wells. How these issues are resolved is
    considered too speculative to be presented.
2. Design of the intake system and to a lesser extent the treatment system depends upon results
   from a well testing program that is not completed. That leads to uncertainty in the design
   which could change the project description and affect the schedule for CEQA/NEPA
   compliance. Moreover, Coastal Development Permits are needed both for the installation of
   test wells and for the ultimate intake system, which adds to uncertainty regarding when the
   system can be fully described.
    Perhaps the biggest risk to schedule is the potential that the results of a well testing program
    were to change the design of the intake system compared to the project description uses in
    CEQA documents, resulting in a change of significance such that the CEQA process would
    be substantially reset. It appears that Cal-Am has conservatively estimated the yield of the
    slant wells and thus conservatively estimated the environmental effects of the proposed
    intake system. However, Cal-Am has described some potential for the test well program to
    warrant a change from slant wells to Ranney style collectors which would require analysis in
    the CEQA documents of this option.
3. The nature of approval from NOAA for the installation of intake facilities is uncertain. It
   appears likely that approval is discretionary and would require compliance with NEPA. The
   administrative process for approval and the uncertainty of the outcome causes some schedule
   risk.
    The potential installation of Ranney collectors as an alternative to the slant well intake
    system would require discretionary approval of the NOAA. Environmental reviews in
    support of such an approval would have to comply with NEPA. Moreover, NOAA has
    verbally opined to the TAC that approval of even the slant wells may be of a discretionary
    nature which requires NEPA compliance. Presumably this will be resolved during scoping
    hearings, but the CPUC schedule for CEQA compliance may need to be adjusted if for
    overall schedule considerations the process is adjusted to allow concurrent review of
    environmental assessments under both CEQA and NEPA. Alternatively, if the CPUC elects
    to base its approval schedule upon only CEQA compliance and ignore potential NEPA
    compliance, it would add to the overall project schedule to have a separate environmental




Page 6-4                                   December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                        IMPLEMENTATION CONSIDERATIONS


   review for the purpose of issuance of Federal Permits necessary for the installation of an
   intake system.
There is a lesser risk associated with permitting the discharge of concentrated brine and other
waste products from the desalination treatment process. It is possible that questions regarding
the adequacy of the mitigation via blending brine with the receiving waters may be raised. It is
also possible that legal questions regarding the path for regulatory approval under the distributed
authority of the NPDES program could delay the issuance of brine disposal permits.
The other primary source of schedule uncertainty and risk for the Cal-Am project, identified by
Cal-Am appears to be related to the California Coastal Commission’s approval of a Coastal
Development Permit for the full-scale project. The Coastal Commission would normally act
after Certification of Environmental Compliance and after all other permits have been obtained.
Two sub-questions have been identified as unresolved.
1. What is the process and timeline to issue Coastal Development Permit for the test wells?
2. What is the timeline for issuance of Coastal Development Permit for the ultimate intake
   system?
The first question primarily is a process question. There needs to be CEQA review of the test
well program. Potentially other permits need to be issued and then the Coastal Commission
needs to meet and approve the application.
Although the CPUC has considered the issue of whether Cal-AM can finance the test wells, the
timeline to obtain permits, install the test wells and incorporate the results from the test wells
into the overall project development plan is not fully defined.

The second question also causes some uncertainty as to the timeline. As pointed out by RBF,
issuance of significant permits, culminating in a Coastal Development Permit can take as little as
4 months following certification of CEQA to more than 5 years with a highly controversial
project.
Perhaps two primary questions of interest to the California Coastal Commission are:
1. Has the project been designed to protect and enhance the Coastal and Marine Environment?
2. Does adequate public oversight of the intake system and the dependent seawater desalination
   project exist to adequately protect the public trust values for the coastal environment under
   California law?
The extent to which these questions are adequately addressed during CEQA review and the
issuance of a CPCN by the CPUC may largely determine the timeline for issuance of a Coastal
Development Permit.
Based upon the CPUC schedule for CEQA compliance and CPCN and the minimum likely
schedule for issuance of major permits thereafter, we have prepared a conceptual implementation
schedule for the Cal-Am project as presented on Figure 6-1.




                                           December 2012                                   Page 6-5
IMPLEMENTATION CONSIDERATIONS                       MONTEREY PENINSULA REGIONAL WATER AUTHORITY


             ICH571(S23(4(#9F?1<@5.0(&6<0161F@.@C9F()?K1>501(:97(@K1(#.02+6(;79J1?@(




The above schedule presumes no delays to the design and construction of the desalination plant
based upon development of the intake systems. Also, no project delays are assumed to be
associated with obtaining project financing. It is presumed that project financing would be
needed prior to major construction activities but would not delay design or test-well activities.
In response to our request Cal-Am provided an updated schedule for development of its project,
shown below in Figure 6-2.
                     ICH571(S2D(4(#.02+6(;79<9=1>(&6<0161F@.@C9F()?K1>501(




The Cal-Am schedule is largely consistent with the schedule we developed. However, it shows a
delay in the construction of test wells. We intend to more fully address these delays in an
updated report to be issued in January. It is noted that the delay in test well construction can
possibly delay the project in two ways.
1. The delay in the development of test wells adds imperative that the project description for
   CEQA evaluations be conservative. Completion of the test wells now takes place after
   presumed certification of CEQA documents.
2. The delay of the test wells requires preliminary design for the full scale project to overlap the
   well testing program. This has potential to delay the issuance of design/build documents for
   the project and could delay final project delivery.
The overall delay in final delivery of the project could be as much as one year. However,
impacts of the delayed test well program upon the overall development schedule will be more
fully analyzed in an update of this report in January 2013.




Page 6-6                                   December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                        IMPLEMENTATION CONSIDERATIONS


DLT     Q&&"9,(&# Q&),B =Q9Q>
DWD presented a schedule identifying their major milestones for project implementation. The
schedule presented and the discussion of permitting by the DWD team displays a sophisticated
understanding of the likely process and pitfalls associated with completing environmental review
and obtaining major permits for the proposed desalination project. The schedule presented
would presume that the major permits (last being the Coastal Development Permit) would be
issued about the middle of the third quarter of 2013. This is based upon a schedule that is much
more optimistic than the generic schedule we developed as shown on Figure 6-3.

              ICH571(S2M(2(#9F?1<@5.0(&6<0161F@.@C9F()?K1>501(:97(@K1(LAL(;79J1?@(




The schedule above represents a delay in project implementation of more than 34 months
compared to the schedule developed by DWD. This major difference is examined below.
DWD has suggested that an Environmental Checklist and Applicant’s Environmental
Assessment (EA) are very nearly completed. Based upon DWD’s demonstrated understanding
of the process for environmental review of the project, the Consultant has accepted this
assurance although the completed EA has not been reviewed.
DWD has presumed a schedule for their EIR/EIS of nine months from the completion of an EA.
Given the level of controversy for the installation of a new seawater intake and the potential
construction of a new facility for brine discharge, it seems likely that the period for scoping
hearings, preparation of a draft EIR/EIS and the adjustment of the project analyses would take
much longer. In the above schedule the Notice of Determination (NOD) for the EIR/EIS would
take place approximately 3 months later than the NOD issued by the CPUC for the Cal-Am
project which is based upon a Subsequent EIR process. The proposed schedule for a new
EIR/EIS is comparable to the schedule adopted by the CPUC.
Our schedule also adds four months for the issuance of a CPCN for CalAm’s participation in the
project. It is possible that this process could run concurrent with other processes to obtain major
permits. But for conservatism this is shown as a critical path activity.
The schedule presumes a 12 month process for obtaining Jurisdictional Permits for facilities
which are impacting the Elkhorn Slough. The process to obtain Section 404 permits from the
U.S. Army Corps of Engineers would take place after issuance of a Notice of Determination for
the EIS. A 404 permit appears to be required for construction of new pipelines crossing the
Elkhorn Slough to connect the desalination plant to the intake and discharge facilities of the
Moss Landing Power Plant and to convey product water from the desalination plant to the


                                           December 2012                                   Page 6-7
IMPLEMENTATION CONSIDERATIONS                      MONTEREY PENINSULA REGIONAL WATER AUTHORITY


CalAm system. It is quite speculative to assess how long that process would actually take. The
Corps would consult with U.S. EPA and EPA would likely take some time to review the project
given both the nature of temporary construction impacts and due to potential concerns regarding
indirect impacts of the project upon the Elkhorn Slough. The 12-month period for issuance of
this major permit is based upon a presumption of some controversy for the project and a
presumption that the Elkhorn Slough is a wetlands area of national significance.
Our schedule further presumes that the issuance of NPDES permits for the intake and discharge
would follow the issuance of Jurisdictional Permits. This is based upon an assumption that the
RWQCB would not review the permits until final approvals had been given for all construction
which affected the intake and discharge. Thus, permits to construct the intake and brine line
would have to be in hand prior to conducting the administrative process for issuance of NPDES
permits. The RWQCB process for issuance of permits has proven to be an administrative
process surrounded by controversy. Thus it is quite speculative to assess a time frame for
issuance of these permits.
The schedule includes six months for the issuance of a Coastal Development Permit by the
California Coastal Commission. The Coastal Commission would consider this permit only after
the EIR/EIS had been certified and all other major permits have been issued. The process for
issuance of this permit in a highly controversial project sponsored by Poseidon Resources in
Carlsbad, California took many years following certification of environmental documentation.
The assumption of six months for this process is based upon an assumption that there would be
some contention of facts during the administrative process to issue this permit but that the prior
extensive review would have resolved these issues. Nonetheless the time period for issuance of
this permit is highly speculative.
DWD provided an updated schedule for their project in response to our request. It is shown
below in Figure 6-4.

                      ICH571(S2Q(4(LAL(;79<9=1>(&6<0161F@.@C9F()?K1>501(




From their proposed schedule, we note the following:

    !      The DWD updated schedule has eliminated the time period for the issuance of
           jurisdictional permits for pipelines crossing the Elkhorn Slough. It is intended that an
           update to this report issued in January would more fully analyze the effects upon
           development schedule of the relocation of the project. However, DWD’s decision to
           re-locate the project south of the Slough greatly simplifies the permitting by


Page 6-8                                  December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                         IMPLEMENTATION CONSIDERATIONS


             eliminating this potentially controversial permit and would undoubtedly shorten the
             permitting schedule for the project.
      !      DWD has also estimated much shorter time duration for CEQA/NEPA compliance
             than the generic schedule we developed for the project. We continue to believe that it
             is reasonable to expect that the level of controversy for this project would dictate a
             longer period for CEQA/NEPA compliance as we have included in our schedule.
      !      DWD has also estimated a much shorter period for design and construction. We
             continue to present a period for design and construction which is longer than
             estimated by DWD and is consistent with delivery via bid to a design-build contractor
             who would manage design, construction and equipment procurement.

While the implementation schedule will be revisited following the receipt of additional
information from DWD about the proposed relocation of the project and the anticipated date of
having a completed project description for CEQA/NEPA review, the project schedule will
apparently shorten substantially. Taken together with the potential delays in the Cal-Am project,
it is difficult to discern a substantial difference in schedule between the two projects.

DL]       "&$"B&) +$)) B,\Q-\g ="+B>
PML has presented a report by SMB Environmental describing the general path for
environmental review, permitting, and commercial agreements which are key to implementing a
proposed project. The report does not present a detailed schedule for implementation. However,
the report offers general insights into the approach to project implementation. Based upon
generalized rules of thumb we endeavored to estimate a project development schedule.
Two major issues were identified related to a project description and Environmental Assessment
for the project:
      1. Assessment of the impacts of seawater intake.
      2. Assessment of the impacts of brine discharge.


6.!.1         Assessment of Impacts of SeaJater Intake
With respect to how the project would assess the impacts of the project’s proposed use of
seawater, PML has proffered that as a matter of law, the proposed desalination project’s use of
seawater from the intake in Moss Landing Harbor should be compared to the 60 MGD use that is
currently permitted for the Moss Landing Commercial Park. Thus it is presumed in the SMB
report that the intake of seawater for the desalination project would not increase the take of water
from the marine environment. As such, the project’s use of seawater could have no adverse
impact upon the environment. In the schedule below, we have taken a different view and
presumed that the project’s proposed use of seawater would be compared to a no-project
alternative in which seawater would not be used. Thus an assessment would have to be made of
the potential impacts of use of seawater. This would include baseline monitoring and complex
modeling to determine the impingement and entrainment impacts of use of the intake. If PML is
correct and for purposes of the Environmental Assessment, EIR/EIS and Coastal Commission
Permitting, the project be presumed to use no water from the marine environment compared to


                                            December 2012                                   Page 6-9
IMPLEMENTATION CONSIDERATIONS                      MONTEREY PENINSULA REGIONAL WATER AUTHORITY


the existing no-project alternative, then completion of the Project Description and Environmental
Assessment phase of work could be substantially shortened from what is presented and shown on
Figure 6-5.
              ICH571(S2R(2(#9F?1<@5.0(&6<0161F@.@C9F()?K1>501(:97(@K1(;*N(;79J1?@(




It is important to note that in the schedule presented above, the time for Project Description and
Environmental Assessment phases presume that a detailed assessment of the project’s potential
impingement and entrainment of marine organisms would have to be made. In this regard it is
significant to note the prior findings of fact by the Regional Water Quality Control Board made
relative to the existing NPDES permit for the Moss Landing Commercial Park (Order R3-2009-
0002, Permit CA000705). Based upon a volumetric approach that compared the Moss Landing
Cement Plant Project to previous 316(b) studies at the adjacent Moss Landing Power Plant, the
RWQCB found that use of up to 60 MGD of seawater through the existing intake structure in
Moss Landing Harbor would have negligible potential impingement and entrainment impacts.
Thus it is also possible that the project may avoid detailed assessments of the potential impacts
of use of seawater and rely instead upon prior work to determine that the use of seawater would
not cause a significant impact upon the marine environment.


6.!.2       Brine Discharge
PML has described a “near zero liquid discharge” treatment system that would substantially
reduce volumes and potential impacts from brine discharge. But that process is not described. It
is thus not possible to independently assess potential impacts from the proposed discharge of
brine. This leads to a great deal of uncertainty with respect to our assessment of the plan for
implementation. A discharge which would require construction of a new discharge structure
could take substantially longer than the generalized schedule above, a discharge that would by
observation have no potential impact upon the marine environment would take substantially less
time than shown in the schedule.
Although it is possible to make a generalized assessment of the PML project plan for
implementation as described above, that generalized schedule is not directly comparable to the
analysis that is possible with the Cal-Am project which has a detailed project description and an
environmental assessment which has already been subject to public review in a prior EIR. It is
highly likely that as the more detailed project description is developed and Environmental
Assessments are completed, controversial issues will arise that will require re-assessments and


Page 6-10                                 December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                  IMPLEMENTATION CONSIDERATIONS


analyses which will delay processing of the environmental compliance documents and major
permits. In the Cal-Am project those issues are well understood and the potential areas of
controversy are well documented.




                                       December 2012                              Page 6-11
MONTEREY PENINSULA REGIONAL WATER AUTHORITY                                         REFERENCES




U ,!I!,!O#!)(
1. RBF Memorandum, Recommended Capacity for the Monterey Peninsula Water Supply
   Project (MPWSP) Desalination Plant, April 20, 2012.
2. SPI Memorandum, Monterey Desalination Study – Initial Scoping and Constraints Analysis,
   August 30, 2012.
3. Direct Testimony of Richard C. Svindland Before the Public Utilities Commission of the
   State of California, filed April 23, 2012.
4. RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Project
   Description, April 20, 2012.
5. Cal-Am Response to SPI Questions, October 3, 2012.
6. Williams, D.E. – Design and Construction of Slant and Vertical Wells for Desalination
   Intake. IDA World Congress-Perth Convention and Exhibition Centre (PCEC) – Perth,
   Western Austrailia September 4-9, 2011 – REF: IDAWC/PER11-050.
7. Pankratz, T. – A Review of Seawater Desal Intake, Pretreatment & Discharge Technologies.
   IDA – Iran 06 WDTS Proceedings September 17 & 18, 2006.
8. Ghiu, S. – 18 Month Demonstration of Slant Well Intake System Pretreatment and
   Desalination Technology for Seawater Desalination. WaterReuse Research Conference
   Proceedings, June 2012.
9. Trussel Technologies Inc. Technical Memorandum, MRWPCA Outfall Hydraulic Capacity
   Analysis, April 18, 2012.
10. DWD Response to SPI Questions, September 12, 2012.
11. Cartier G., Corsin P. - Description of Different Water Intakes for SWRO Plants. IDA World
    Congress-Maspalomas, Gran Canaria –Spain October 21-26, 2007 - REF: IDAWC/MP07-
    185.
12. DWD Response to SPI Questions, September 8, 2012.
13. Tenera Environmental, Preliminary Modeling of Potential Impacts from Operation of a
    Desalination Facility Ocean Intake, August 22, 2012.
14. Replacement Cost Approaisal Summary Report, prepared by Landmark Realty Analysts,
    Inc., October 3, 2011.
15. Structural Evaluation, Intake & Outfall Pipelines, Intake Pump Station and Water Storage
    Reservoirs, The People’s Moss Landing Water Desalination Project, Moss Landing Green
    Commercial Park, Modd Landing, CA, August 14, 2012.
16. Monterey County Planning & Building Inspection Department; Meeting September 30, 2004,
    Agenda Item 6.
17. Coastal Water Project Pilot Plant Report, May 2010, MWH.
18. Outfall Video, Moss Landing Marine Lab, California State University.



                                         December 2012                                  Page 7-1
REFERENCES                                       MONTEREY PENINSULA REGIONAL WATER AUTHORITY


19. Seawater Outfall for Kaiser Aluminum and Chemical Corporation, Moss Landing,
    California, by Kaiser Engineers, 1971.
20. RBF Memorandum, Monterey Peninsula Water Supply Project (MPWSP) Project
    Description, April 20, 2012.
21. Presentation – Monterey Peninsula Water Supply Project – Presentation to Monterey Co.
    Water Resources Agency, June 25, 2012.
22. California American Water Company, Coastal Water Project, Final Environmental Impact
    Report, October 30, 2009.




Page 7-2                                December 2012
MONTEREY PENINSULA REGIONAL WATER AUTHORITY            APPENDIX A


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                                              (




                                       December 2012     Page A-1
                                                                     MPRWA!E'ALUATION!OF!SEAWATER!DESALINATION!PROJECTS
                                                                                 No4e67er!2012!Draf>!Repor>
                                                                               Re4ieA!Co66en>s!and!Responses


DRAFT REPORT

                                Page    Date of
  No.       Comment By                                                                            Comments                                                                                   Response/Action
                                 No.   Comment
                                                  The three proposed projects offer differing sources and methods of securing source seawater for
   1     DeepWater Desal, LLC   NA     11/13/2012 desalination - marine well water, shallow harbor water, and deep ocean water. Each carries its                Agreed. We have accounted for this in our evaluation.
                                                  respective set of risks with regard to quality, source supply, reliability, and schedule.
                                                  DWD is proposing a conventional screened, low velocity, open-ocean intake located at depth below the          We do not agree that the proposed screened open intake carries a
                                                  photic zone to secure a reliable supply of high quality source water for the desalination plant. Our          significant advantage at this stage of project development to warrant
                                                  research shows that the deep water intake location ensures stable high quality (low turbidity) raw water      placing it above other alternatives. The necessary marine studies are not
                                                  along with an insignificant risk of impingement and entrainment of living organisms. Preliminary tests        complete, so presupposing results is by definition speculative. Open
   !     DeepWater Desal, LLC   NA     11/13/2012 conducted so far confirm our observations, and DWD is presently conducting extensive on-going water           intakes are not preferred by State regulators at present, and only
                                                  quality monitoring and oceanographic studies collecting data which we expect to further confirm these         considered for approval when a sub-surface alternative has been ruled out.
                                                  findings. With respect to successful construction and reliability of a deep water intake, there is            It therefore presents a comparatively high regulatory threshold. Finally, the
                                                  effectively zero net technical risk in the location being proposed .. l"his method of open water extraction   installation of the proposed intake pipeline is not without risk--it will entail
                                                  of source water for RO desalination plants is used for more than 98% of the desalination plants               construction activities in sensitive habitat that could prove controversial.
                                                  currently in operation worldwide.
                                                  By contrast, Cal Am appears to be proposing a largely unproven alternative intake method using beach
                                                  located slant wells to extract source water. This method requires a unique set of conditions to exist for     Cal Am has employed competent design professionals in establishing the
                                                  serious consideration of this method as a reliable long-term supply of raw water. Slant wells for source      proposed subsurface intake wells, including Dennis Williams of
                                                  water extraction are entirely dependent on site-specific geological conditions. Therefore, a thorough         Geoscience, Inc. Dr. Williams investigated and designed the successful
                                                                                                                                                                slant demonstration well in Dana Point, California, which has operated well
   "     DeepWater Desal, LLC   NA     11/13/2012 knowledge of conditions is necessary including computer modeling, test boreholes, pump testing, and
                                                  pilot testing. Environmental concerns regarding the impact of a large well field in the Monterey Bay          throughout its 2-year operating period, following predictable capacity
                                                  Marine Sanctuary can be expected, and cannot be adequately addressed by a single test well.                   trends. It is our opinion that Cal Am and its engineering team are engaged
                                                  Experience elsewhere suggests that determination of the suitability of any one site can consume years         in a conservative, deliberative design approach consistent with a
                                                  of research and testing prior to consideration for implementation, if at all feasible.                        successful outcome.

                                                  In addition, test wells for the Cal Am project have not yet been permitted, constructed or operated to
                                                  demonstrate the feasibility of this approach for source water extraction. Nor can the potential impact on
                                                  existing aquifer withdrawal rates and quality be accurately estimated until the full-scale system is
                                                  actually operational; which could cause delays in operation if additional treatment components are
                                                  needed or plant capacities change. The timeline to permit, construct and adequately test slant well          Cal Am's schedule for installation of the proposed test well is being
         DeepWater Desal, LLC   NA     11/13/2012
   #                                              technology at the Cal Am site may likely consume a minimum of 12 to 16 months (versus the 6 months adjusted based on revised information. The impacts of this change will be
                                                  estimated by Cal Am and included in the SPI report, reference Figure 6-1 ). If the test well is not          addressed in the supplemental report schduled for January 2013.
                                                  successful after testing, significant schedule impacts would result, and an alternative source water
                                                  extraction method will have to then be developed, permitted and constructed, further delaying the
                                                  schedule.
                                                                                                                                                               We have reviewed the previous pilot work conducted at MLPP and
                                                  The People's Moss Landing project proposes to extract source water from the Moss Landing Harbor.
                                                                                                                                                               disagree with the characterization that it was "thwarted" by water quality
                                                  Again, experience confirms that harbor water is of extremely poor and variable quality and will require,
                                                                                                                                                               issues. The study evaluated UF pretreatment and found it successful. PML
                                                  at a minimum, additional pretreatment process steps to reliably produce feedwater to the RO
                                                                                                                                                               is proposing two-stage pretreatment incorporating granular media filters
                                                  membrane that meet the SWRO membrane specifications. The first failed desalination project at Moss
                                                                                                                                                               followed by UF. We consider this approach consistent with the previous
   $     DeepWater Desal, LLC   NA     11/13/2012 Landing in 2006 attempted to use the Moss Landing Harbor water but had its pilot testing thwarted by
                                                                                                                                                               work and adequately conservative. They have further proposed to conduct
                                                  source water quality issues. Until the proposed pretreatment is extensively pilot tested, it is not possible
                                                                                                                                                               a 12-month pilot program (included in their schedule) to validate the overall
                                                  to finalize either the design or the cost of the proposed project. Pilot testing for pretreatment of highly
                                                                                                                                                               process design. The costs for their pretreatment system as proposed are
                                                  contaminated source waters would typically require 12-months to capture seasonal effects on the
                                                                                                                                                               included in our evaluation, along with the schedule impacts of their pilot
                                                  proposed process.
                                                                                                                                                               program
                                                  DWD respectfully submits that the potential cost, risk and schedule impacts of the three candidate
                                                  methods of source water extraction are not equivalent. Cal Am's proposed slant well alternative intake
                                                  clearly offers the greatest risk as there is only one successfully operating, large capacity, i.e. (greater
                                                  than 5 mgd) SWRO drinking water facility utilizing slant well technology anywhere in the world (Oman
   %     DeepWater Desal, LLC   NA     11/13/2012 Sur) of which we are aware. The Sur plant takes advantage of meeting all site-specific requirements          See above response regarding the slant well issue.
                                                  supporting beach wells; and was built after 3+ years of testing. to prove this was possible with the
                                                  support of extensive computer modeling and field testing. The 21 mgd facility requires 32 wells and the
                                                  well field consumes more than 12 acres.
                                                  The People's project has the next highest risk associated with the design and operation of a
                                                  pretreatment system that can reliably treat the very poor quality harbor source water to the very high
                                                  standards required by SWRO membrane. This risk can only be mitigated by extensive pilot testing of
   &     DeepWater Desal, LLC   NA     11/13/2012 duration of at least 12-months to account for seasonal water quality changes and for accurate source          The PML project and our evaluation includes the recommended measures.
                                                  water characterization; impact on the proposed pretreatment processes, and removal due to
                                                  contaminants such as oil and grease and harmful algal blooms.

                                                                                                         '()*!+!,-!+"                                                                                    .'/01234(-5/*6,452/*78*9:,;;*<5=
                                                                     MPRWA!E'ALUATION!OF!SEAWATER!DESALINATION!PROJECTS
                                                                                 No4e67er!2012!Draf>!Repor>
                                                                               Re4ieA!Co66en>s!and!Responses


DRAFT REPORT

                                Page    Date of
  No.       Comment By                                                                            Comments                                                                                   Response/Action
                                 No.   Comment

                                                  All three proposed projects have proposed reverse osmosis as the desalination process and the 0 & M
                                                  costs associated for each project should be roughly equivalent so far as the RO system is concerned.
                                                  However, both the Cal Am and Peoples projects contain process equipment that is not required for the           Based on subsequent correspondence between DWD and SPI, we feel we
                                                  DWD project. Cal Am has the added 0 & M costs associated with its slant well field and People's has            have traced the source of the discrepancy primarily to the line item listed
                                                                                                                                                                 as "Other Proponent Expenses", which we failed to fully understand from
   >     DeepWater Desal, LLC   NA     11/13/2012 the added costs associated with its additional pretreatment steps (ultrafiltration). Yet, the SPI report has
                                                  assigned the highest 0 & M cost to the DWD project. Intuitively, this does not seem to be a technically        the DWD supplied costs originally. The quantity listed in the draft report
                                                  sound conclusion. However, without reviewing the 0 & M cost work-up prepared by SPI we cannot be               overlaps with O&M labor estimate included in our cost evaluation. The
                                                  more specific in ascertaining how SPI arrived at this conclusion. DWD would appreciate the opportunity         O&M costs will be revised in the final report to reflect the new information.
                                                  to review SPI's cost evaluation worksheet to assess whether any incorrect assumptions may have been
                                                  used in the evaluation.
                                                  The most notable difference is the inclusion of a row labeled "Other Proponent Expenses" only to the
                                                  DWD project. The Cal Am and PML projects have no costs identified in this row, but SPI assigned a
                                                  number from DWD's input that is duplicated in other costs identified as Chemicals and O&M Labor. Our
                                                  submission clearly identified what was in our costs. We know from our own analysis of the Cal Am and
                                                  PML projects that they have similar "Other Proponent Expenses". The figures provided for Chemicals is
                                                  significantly higher than Cal Am while we included chemicals in our "Expendables" category. We clearly
                                                  identified "O&M Labor'' in our submission sized for the plant and design characteristics. As a result, the
                                                  0 & M Costs were overstated by $2.94 million for the 9kAFY plant and overstated by $2.78 million for
                                                  the 5.5kAFY sized plant. We are inserting Table ES-2 from the SPI report with DWD's corrected
                                                  numbers below eliminating the duplicated costs and overstated energy costs.




   ?     DeepWater Desal, LLC   NA     11/13/2012                                                                                                                See response above.




                                                  Schedule forecasting is by nature speculative. However, we have noted that Figure 6-1 -Conceptual
                                                  Implementation Schedule for the Cal Am Project forecasts the slant well test program will be completed
                                                  in 9-months commencing 2"d quarter of 2013; and the generic schedule proposed by SPI contains the
                                                  following condition " ... presumes no delays to the design and construction of the desalination plant          We will adjust Cal Am's schedule for the test well program according to
                                                  based upon development of the intake systems." (Ref. page 57). We sincerely question whether this              new information received in a supplemental report due in January 2013.
                                                  assumption is reasonable given the uncertainty of permitting, construction and the required test period        Cal Am's engineering team is actively engaged in the design and proposed
                                                  duration discussed above. The only experience with large capacity slant wells in California is an              construction sequence for the test wells, and we find their schedule
  +@     DeepWater Desal, LLC   NA     11/13/2012 ongoing slant well test program at Doheny Beach in southern California being conducted for the South
                                                                                                                                                                 credible from an engineering and construction perspective. Permitting
                                                  Orange Coastal Ocean Desalination Project that commenced in 2005 and is not scheduled to conclude              concerns as stated, speculative--but we do note a preference of State
                                                  until 2013. It would be helpful if SPI would share the rationale and basis for its stated assumption. It       regulators for subsurface intakes at present which could smooth their path
                                                  should also be noted that the Cal Am schedule would be substantially impacted should the test program          to approval.
                                                  not be ultimately successful, which would entail going to an entirely new method for source water
                                                  extraction. We believe that it is appropriate to reflect this risk element in the evaluation, which in our
                                                  view is substantial.



                                                                                                         '()*!!!,-!+"                                                                                    .'/01234(-5/*6,452/*78*9:,;;*<5=
                                                                      MPRWA!E'ALUATION!OF!SEAWATER!DESALINATION!PROJECTS
                                                                                  No4e67er!2012!Draf>!Repor>
                                                                                Re4ieA!Co66en>s!and!Responses


DRAFT REPORT

                                Page    Date of
  No.       Comment By                                                                              Comments                                                                                    Response/Action
                                 No.   Comment

                                                    With respect to the Conceptual Implementation Schedule for the DWD Project, Figure 6-2, we note that
                                                    the schedule listed by SPI is substantially longer than we forecast. There are two tasks items that we
                                                    believe should be revised:

                                                    Task Item 6. Desai Plant Preliminary Design - DWD can execute preliminary design concurrently with
                                                    the prior task items. Unlike either the Cal Am or the Peoples projects, DWD can accurately determine
                                                    its design source water quality (and is presently collecting the necessary data needed with instruments
                                                    deployed in the ocean off Moss landing and regular water sampling). Cal Am cannot characterize its
                                                    design feedwater until the completion of the slant well test program. Although Cal Am has tried to              The proponent's updated schedule was solicited since the original draft and
                                                    anticipate the raw water quality and incorporated additional pretreatment components to possibly treat          has been presented in the report. It has not been fully analyzed but neither
                                                    the feed water, only an analysis of the feed water from the actual tested in-field conditions will direct the   is it fully accepted. With respect to Task 3, text has been added to the
                                                    extent and associated capital and operational cost impact this will have on the plant. Likewise, the            report to note that a relocation of the project as indicated would
                                                    Peoples project must first complete its 12-month pilot testing for similar reasons.                             substantially lessen the project schedule duration. However, this has not
  ++     DeepWater Desal, LLC   NA     11/13/2012
                                                                                                                                                                    been fully analyzed since this information came to light so late. With
                                                    Task Item 3. Jurisdictional Permits -As noted in the report, DWD has previously been barred from                respect to Task 6, proponents have indicated a tremendous schedule
                                                    disclosing certain information related to its project due to a binding non-disclosure agreement. We are         advantage in all phases of design and construction compared to the
                                                    pleased to now be able to disclose, that DWD is currently engaged in exclusive negotiations for a               generic schedule presented by the Consultants. Both points of view are
                                                    building south of Elkhorn Slough as an alternative location for the seawater reverse osmosis plant              presented in the report.
                                                    portion the project. This will result in a reduction of capital arid a·perating costs and an acceleration of
                                                    the schedule relative to the Jurisdictional Permits as it will not be necessary route piping that crosses
                                                    the Elkhorn Slough. While we acknowledge the Slough does have logistical challenges, this alternative
                                                    effectively eliminates the 12-month schedule item associated with such Jurisdictional permitting. The
                                                    associated costs savings are $5.5 million in CapEx for the 9kAFY plant size and $2.7 million for the
                                                    5.5kAFY plant size. Additionally, the annual 0 & M Costs are lower by $1 07/AFY for a total cost of $1
                                                    ,91 0/AFY for the 9kAFY plant and $2,292/AFY for the 5.5kAFY sized plant.

                                                  Because of the critical nature the desalination plant and the necessity to meet the cease and desist
                                                  order deadline, we respectfully submit that the DWD project offers the lowest risk of significant changes
                                                  in cost and schedule. Because the DWD project relies on a conventional intake for the supply of high
                                                  quality source water for desalination, the risk elements for the DWD project are limited to regulatory
                                                                                                                                                            We believe the advantages cited are excessively speculative given the
                                                  review and permitting. While both the Cal Am and Peoples project are also subject to regulatory and
  +!     DeepWater Desal, LLC   NA     11/13/2012                                                                                                           present state of project development; and do not warrant a described
                                                  permitting risk, they have added significant, material technical risk as well. In the case of Cal Am, the
                                                                                                                                                            preference in our evaluation.
                                                  risk associated with relying on a novel and largely unproven and site specific method of source water
                                                  extraction; and in the case of the Peoples project, the challenge of reliably producing high quality RO
                                                  feedwater from a very contaminated and highly variable source water.

                                                    Single pass RO system proposed by DWD and PML-while Cal Am partial double or two pass ystem-                    All three projects would supply water into the Cal Am distribution system to
                                                    what are advantages/disadvantages and what is cost factor for single vs double?                                 integrate with existing supplies. For an apples to apples comparison, we
                                                                                                                                                                    saw it as necessary to compare the projects on the basis of achieving a
                                                                                                                                                                    consistent quality of product water. Single and partial-double pass RO
                                                                                                                                                                    system would produce markedly different qualities of product water--so we
  +"           Sue McCloud      NA     11/13/2012
                                                                                                                                                                    performed our evaluation on the basis of all projected incorporating a
                                                                                                                                                                    partial second pass RO system. It should be noted that this was in an
                                                                                                                                                                    effort to provide a balanced evaluation of the projects. Actual facility
                                                                                                                                                                    construction could proceed on either basis, subject to agreement of
                                                                                                                                                                    interested parties and State regulators.
                                                    If PML cannot use all or part of intake infrastructure-what is cost differential                PML has included $3.0M in their cost estimates to provide upgrades to
                                                                                                                                                    their existing intake and outfall facilities. This, in concert with the 30%
  +#           Sue McCloud      ES-7   11/13/2012
                                                                                                                                                    overall cost contingency included in our estimates is sufficient to account
                                                                                                                                                    for potential costs at this stage.
                                                  Does energy cost use MRWMD power-also green aspect if this energy generated from landfill methane Energy costs were supplied by the individual proponent teams. We
                                                  is used.                                                                                          validated their costs to a certain extent, but were not in a position to
  +$           Sue McCloud      NA     11/13/2012                                                                                                   recommend sources of energy. In general, proponent teams have an
                                                                                                                                                    incentive to procure the lowest cost sources of energy for their proposed
                                                                                                                                                    project on their own.

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DRAFT REPORT

                             Page    Date of
  No.      Comment By                                                                          Comments                                                                               Response/Action
                              No.   Comment

                                               Implementation schedules expand for each of 7 points, where is each project now in the process and         The schedules show each project's forecast development from October
  +%           Sue McCloud   ES-7   11/13/2012 what steps are yet to be accomplished and in what time frame.                                              2012 on. The schedule start date and subsequent activities are our best
                                                                                                                                                          estimate of progress going forward.
                                                 Saw no mention of legal action impact for any of the projects.                                           The legal risk of the various projects was outside the scope of our
  +&           Sue McCloud   NA     11/13/2012
                                                                                                                                                          evaluation.
                                                 Calam project- do costs reflect 8 slant wells or 5 and shouldn't costs have both costs?                  The costs presented for the 9 kAFY project reflect installation of 7 slant
  +>           Sue McCloud   NA     11/13/2012                                                                                                            wells; costs for the 5 kAFY project reflect installation of 5 slant wells.
                                                                                                                                                          Estimates for both facility sizes are presented in the report.
                                                 Would be helpful to have a map with SVGB superimposed over the Cal Am project.                           We feel sufficient information is included in the report regarding the SVGB
  +?           Sue McCloud   NA     11/13/2012
                                                                                                                                                          for the purposes or our evaluation.
                                                 DWD talks about Phases 1 and 2-yet text seems to talk about infrastructure being done at the outset-if   DWD is proposing to proportionally share costs associated with intake and
                                                 so, will the desal project be helping to pay for the larger cost project                                 brine disposal facilities proportionally among the Phase 1 and 2 projects.
  !@           Sue McCloud   NA     11/13/2012
                                                                                                                                                          Remaining project facilities would only be constructed for the Phase 1 plant
                                                                                                                                                          requirement and costs are reflective of that.
                                                 Both DWD and PML use corrosion inhibitors-is this for intake and outflow pipes? As it does not appear    In service of achieving a balanced evaluation, we will remove the use of
                                                 in the Cal Am costs.                                                                                     corrosion inhibitors from the DWD and PML estimates. We feel sufficient
  !+           Sue McCloud   NA     11/13/2012
                                                                                                                                                          post-treatment will be achieved by the calcite, carbon dioxide, and sodium
                                                                                                                                                          hydroxide systems included in all three projects.
                                               Page 3-2 small matter but the 46 acre parcel is accessed by an easement from the Monterey Regional
  !!           Sue McCloud   3-2    11/13/2012                                                                                                            Noted, will amend the description.
                                               Waste Management District.
  !"           Sue McCloud   NA     11/13/2012 Fall back for Cal Am's slant wells would be the Ranney well but no indication of cost difference.          The costs are roughly comparable--will so state.
                                               DWD intake pipe crossing Hiway 1-what is involved in using existing tunnel and was this taken into time    Yes, use of the Dynegy tunnels is subject to a pending agreement between
  !#           Sue McCloud   NA     11/13/2012
                                               factor for necessary permissions                                                                           DWD and Dynegy.
                                               DWD refers to proprietary systems of MLPP-how will costs be obtained                                       The costs would be borne by other entities outside the desalination facility.
  !$           Sue McCloud   NA     11/13/2012                                                                                                            Evaluated costs for DWD represent the total cost of the facility in
                                                                                                                                                          production of water.
                                                 Was lack of redundancy for product storage figured in forsome suitable temporary storage?                All sites have sufficient space to accommodate temporary storage tanks.
  !%           Sue McCloud   NA     11/13/2012
                                                                                                                                                          No additional costs were ascribed.
                                                 When will additional analysis to assess the vertical mixing zone at the interface of the submarine       The results of the DWD intake studies are anticipated to be available
  !&           Sue McCloud   3-8    11/13/2012
                                                 canyon be completed                                                                                      Spring 2013.
                                                 Cost of construction with in the flood plain
                                                                                                                                                          Unknown, but likely not significant. The PML site is an area of the flood
  !>           Sue McCloud   NA     11/13/2012
                                                                                                                                                          plain that does not require flood insurance, so the risk is gauged to be low.
                                                 Recommendation for partial second pass RO treatment system-cost
                                                                                                                                                          See more detailed response above, but it was in service of providing a
  !?           Sue McCloud   NA     11/13/2012
                                                                                                                                                          balanced, apples to apples cost evaluation for the purposes of this report.
                                                 Several unknowns relative tothe outfall-costs and time                                                   Agreed, though we feel the $3.0M cost provided by PML as described
  "@           Sue McCloud   3-11   11/13/2012                                                                                                            above along with the overall 30% contingency provide sufficient
                                                                                                                                                          conservatism at this stage of project development.
                                                 What is process/cost of returning groundwater to the Salinas Basin                                       Costs are included in the evaluation; and a primary reason why Cal Am's
                                                                                                                                                          plant sizes are higher in the evaluation than PML or DWD. The costs
  "+           Sue McCloud   NA     11/13/2012
                                                                                                                                                          include pumping, treatment and return pumping and piping systems to the
                                                                                                                                                          existing CSIP ponds.
                                                 Economics-evaluated-how and by SPI? Page 5-6 top of page you independently adjust costs and              Cost estimates are part of the engineering services we provide. As
                                                 developed your own estimates-hope share systems with someone.                                            described, we primarily looked to validate costs provided by the
  "!           Sue McCloud   5-6    11/13/2012                                                                                                            proponents by preparing our own companion estimates. The purpose of
                                                                                                                                                          our estimates is to provide a balanced comparison of the three projects on
                                                                                                                                                          an equivalent basis.




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DRAFT REPORT

                              Page    Date of
  No.      Comment By                                                                             Comments                                                                                    Response/Action
                               No.   Comment

                                                  I also still sit on the board of the Monterey Regional Waste Management District and have recently
                                                  stepped down as its Vice Chair. It is in that capacity that I wanted to talk to you. Specifically I wanted to
                                                  know what figure are you using for energy cost?
                                                  As you perhaps know, the District is planning for a $20M plus new generator to increase the amount of
                                                  methane gas we convert into energy.

                                                  It just so happens that our monthly board meeting was this past Friday. At this meeting staff presented
                                                  3 years of revenue info re the utilization of landfill gas which currently produces 5 megawatts of      Proponents are incentivized to procure the lowest cost of energy for their
  ""           Sue McCloud    NA     11/18/2012
                                                  renewable energy; thus saving the district about $350k in deferred power purchases and sells the        projects.
                                                  excess on the grid. We presently have 2 power sales contacts with PG&E and 3Phases Energy.

                                                  Williiam Merry is the GM for the District and an engineer. As I understand it you two have not talked
                                                  and I think perhaps you should to compare the cost of District energy (which I will send or have sent to
                                                  by email) with your cost projections. We are interested in making this as green a project as possible
                                                  and in keeping revenues local.

                                                  First, the estimates for Cal-Am's cost of desal water.appear to be unusually low considering that Cal-          Cal Am's cost of capital will be amended in the final report to reflect their
                                                  Am's capital costs are $47 million higher than those of Deepwater. Further, I can't find project                higher cost of financing and overall financial model. This will be
                                                  management fees and Cal-Am's profits from the project in the cost estimates. For information, Cal-Am's          accomplished by using a higher, representative capital recovery factor for
                                                  project management fees are $25.9 million and Deepwater's are $17.9 million. Dave Stoldt tells me that          their project.
                                                  CalAm's profit level would be approximately $8 million declining by $250,000 each year due to
  "#           Dale Hekhuis   NA     11/13/2012
                                                  depreciation of assets. Finally, there is an assumption in the [SPI] analysis that warrants comment. That       With regard to the proposed surcharge, we make no mention of it in the
                                                  assumption is that Cal-Am's $99 million proposal for zero-cost, advanced funding of its project, courtesy       report as it is outside the scope of our evaluation. All proponents are
                                                  of Peninsula ratepayers, will be operative. This is surprising. The proposal                                    gauged to have sufficient capital to pursue their projects going forward--we
                                                  is yet to be approved by the CPUC and has many drawbacks for ratepayers. At a minimum, $99 million              make no representation further than that. The surcharge is part of an active
                                                  in project equity for ratepayers is mandatory if this proposal is to be acceptable.                             process at the CPUC and that information is publicly available.
                                                  Second,Cai-Am has recently advised that it is looking at a host of contingencies for slant wells. These         Our report reflects information available as of October 15, 2012 for the
                                                  include: (1) Shallower slant wells; (2) Horizontal Ranney wells; (3) Open ocean intake nearby; (4) Slant        three projects. The Cal Am contingency plans were in response to an
                                                  well at Moss Landing; (5) Open ocean intake at Moss landing; (6) Locating the desal Plant at Moss               order from the CPUC. We consider the potential for implementation of any
  "$           Dale Hekhuis   NA     11/13/2012
                                                  Landing. At a minimum, these contingencies give rise to uncertainty and risk as to the course of the Cal-       of the plans overly speculative at this point. Part of the reason for the
                                                  Am project. Question: Did [SPI] sort through the potential consequences of invoking these                       recommended 30% cost contingency included in our evaluation is to
                                                  contingencies for their impact on Cal-Am's implementation schedule?                                             account for unknowns of this nature.
                                                  Third, the environmental information that would support cross comparisons of the intake/outfall systems
                                                  wasn't available to [SPl]. This information will come from EIRs currently under preparation. This is
                                                  important because environmental impact information will be absolutely necesary in order to evaluate (1)         Text has been added to the report to clarify these points. Detailed
  "%           Dale Hekhuis   NA     11/13/2012   The impact on sea life; (2) The impact on the seabed particularly from brine disposal; (3) The impact on        assessments of potential impacts of intake and discharge are central to the
                                                  sea water intrusion. Question 1 : Will these matters fall by the wayside because it is judged that EIR          environmental review of all projects.
                                                  completion times are too far into the future? Question 2: Would this be
                                                  acceptable to permitting authorities?
                                                  The final SPI Report should have a listing, at the beginning of the report, of the key assumptions              Assumptions are primarily schedule related and these are described
  "&           Dale Hekhuis   NA     11/21/2012   underlying the report's analysis. An example of a key assumption might be that Cal-Am is eligible for           adequately in the discussion of proponent schedules. Cal Am's financing
                                                  public financing.                                                                                               model will be adjusted as described above.
                                                SPI should prepare a memo, for inclusion in the report, listing all costs that dropped out of the the cost        The economic evaluation in the report seeks to present total costs of each
                                                analysis because they did not fit an apples to apples comparison format. Simply because costs may not             project for production and supply of potable water from a seawater
  ">           Dale Hekhuis   NA     11/21/2012 have fit the format is no reason to ignore them. At a minimum, the report reader needs to know up-front
                                                                                                                                                                  desalination facility on an equivalent basis. We agree that Cal Am has a
                                                what Cal-Am's profits are. Ratepayers will be paying for these profits.                                           different cost of capital and will amend that evaluation in the final report.
                                                With regard to the $99 million of advance funding, it should be made clear that it is only a proposal that
                                                is yet to be vetted by the CPUC and the DRA. There may be changes in what Cal-Am has asked for in                 The specifics of funding Cal Am's project are outside the scope of our
  "?           Dale Hekhuis   NA     11/21/2012
                                                the final version. I feel that it's improper to use a proposal, and that's all that advance funding is, without   evaluation.
                                                making it clear to the reader that it is a proposal.
                                                                                                                                                                  We have assigned a uniform project implementation cost to all three
                                                As my colleague Doug Wilhelm has recently suggested, an estimate of the additional costs that could
                                                                                                                                                                  projects in our evaluation to cover project development prior to
                                                be incurred by the slippage of the project completion schedules that SPI has come up with - anywhere
                                                                                                                                                                  construction. We feel this estimate, along with the 30% overall project
  #@           Dale Hekhuis   NA     11/21/2012 from 8 months to a year beyond the deadline - is in order. Just how serious is the slippage from a cost
                                                                                                                                                                  contingency, is sufficient to account for typical delays in project
                                                standpoint? That is what SPI should be asked to come up with.
                                                                                                                                                                  development forecast at this time. Evaluations beyond that are outside the
                                                                                                                                                                  scope of this study
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DRAFT REPORT

                              Page    Date of
  No.      Comment By                                                                            Comments                                                                                   Response/Action
                               No.   Comment

                                                  Why the capital structure of 57 equity to 43 debt when the current capital structure is 42 equity to 58      The discussion of Cal Am's financing structure will be amended in the final
  #+           Ron Weitzman   NA     11/9/2012
                                                  debt?                                                                                                        report.
                                                  Why 5% interest rate for Cal Am when it currently charges ratepayers 6.48%?                                  The discussion of Cal Am's financing structure will be amended in the final
  #!           Ron Weitzman   NA     11/9/2012
                                                                                                                                                               report.
                                                  Why the interest rate of 4% for a public agency when it could probably get 3.5% or less, and it is a lot     The discussion of Cal Am's financing structure will be amended in the final
  #"           Ron Weitzman   NA     11/9/2012
                                                  more likely to have access to state revolving-fund money at 2.5% than Cal Am?                                report.
                                                  How does the $207 million cost for Cal Am's 9,000 acre-foot project in the table comport with the $365
                                                                                                                                                               The costs provided to the CPUC include additional, common distribution
                                                  million in Cal Am's proposal to the CPUC?
                                                                                                                                                               facilities within Cal Am's system that were not included in the project--as
                                                                                                                                                               they apply equally to all three. Further, the CPUC had Cal Am include an
  ##           Ron Weitzman   NA     11/9/2012
                                                                                                                                                               additional contingency in their cost estimate to achieve a "maximum
                                                                                                                                                               credible cost" for planning purposes. Our evaluation considered all three
                                                                                                                                                               projects with a common 30 percent contingency alone.
                                                  The timeline is what troubles me most. The SPI report is based on data available in July. Since then,
                                                                                                                                                               PML project timeline has been corrected from the original report. However,
                                                  Cal Am's project has been delayed at least a year, and Cal Am may even have to start all over because
                                                                                                                                                               the timeline for project description and EIR/EIS remain generic based upon
                                                  of the waterrights issue. The Pacific Grove project is likely to begin work on its EIR before the end of
                                                                                                                                                               assumed need for detailed evaluations of project intake and discharge
  #$           Ron Weitzman   NA     11/9/2012    the year, not years off, and since July the project has changed its seawater intake plans so it will not
                                                                                                                                                               impacts. Text has been added to reflect potential delays in the CalAm
                                                  require special pre-processing of the intake water.
                                                                                                                                                               Project due to delays in the test well project but these have not been fully
                                                                                                                                                               analyzed. DWD has presented an updated proponent's schedule.
                                                Why does the Cal Am total capital cost for the 9,000 acre-foot project in each of the two reports differ
  #%           Ron Weitzman   NA     11/12/2012 substantially from the $365 million in Cal Am’s CPUC proposal? (Likewise, for the 5,500 project)               See response above.

                                                In comparing “apples to apples,” why does the SPI consultant load the comparison in favor of the Cal           The evaluation of all three projects on an equivalent RO treatment basis
                                                Am project by adding a second pass-through RO to the two non-Cal Am projects while using a 4%                  does not unbalance it; rather it balances it in evaluating all three projects
  #&           Ron Weitzman   NA     11/12/2012
                                                interest rate for all projects (Table ES-2) when the rate is much lower for a public than for a private        on an equivalent basis. The Cal Am financing model will be adjusted in the
                                                project?                                                                                                       final report.
                                                Why does the SPI consultant not consider that the DeepWater project cannot own or operate a                    DWD plans to establish a JPA composed of public agencies to own its
  #>           Ron Weitzman   NA     11/12/2012
                                                desalination plant in Monterey County because it has no public partner?                                        project. Will clarify in the final report.
                                                Why does the SPI consultant not take into account the state Agency Act’s prohibition of groundwater            DWD does not to our knowledge extract groundwater as part of its intake
                                                (not just fresh water, but any groundwater) exportation from the Salinas Valley Groundwater Basin,             system. For Cal Am, the issue is being vetted through the CPUC process
                                                except for Fort Ord? These last two items are fatal flaws for the DeepWater and Cal Am projects.               and it's considered unnecessarily speculative at this point to presuppose an
  #?           Ron Weitzman   NA     11/12/2012
                                                                                                                                                               outcome. As a general rule, the CPUC as a State agency has broad
                                                                                                                                                               authority to overrule other agency ordinances in the service of establishing
                                                                                                                                                               a necessary public water supply.
                                                (i) would like to see the capital recovery for Cal-Am in Table 5-2 reflect a higher cost of capital, such as
  $@             Paul Hart    5-4    11/14/2012                                                                                                                A higher cost of capital for Cal Am will be included in the final report.
                                                11%
                                                (ii) believes there are advantages to ownership in that future lease costs after the thirtieth year should
                                                                                                                                                               The cost evaluation in the report covers a 30-year term. Costs beyond that
  $+             Paul Hart    NA     11/14/2012 be reflected in overall cost of projects which assume leases, in that ownership costs are fully amortized
                                                                                                                                                               are outside the scope of this evaluation.
                                                over thirty years;
                                                (iii) If Cal-Am needs to assert eminent domain to gain site control, what will be the impact on cost?          Not significant. Cal Am is currently offering assessed costs for the
  $!             Paul Hart           11/14/2012
                                                                                                                                                               property, which would likewise be the cost of any eminent domain
                                                  (iv) Did not feel DWD third part intake costs were adequately reflected.                                     The costs will be born under the proposed project structure by a separate
  $"             Paul Hart    5-8    11/14/2012
                                                                                                                                                               entity. That fact is integral to DWD's proposed project.
                                                  (v) Wants to be sure the additional capital and operating costs related to extraction, treatment, and
  $#             Paul Hart    NA     11/14/2012                                                                                                                Costs are included as described above.
                                                  return of Salinas Valley groundwater are fully included in the costs of potable water delivered.
                                                  (vi) Would like clearer explanation for the difference in timelines – why is the PML schedule extended       The text is revised to clarify this point. Period for project description
                                                  for a detailed project description, but not the other projects?                                              includes time for evaluation of intake and discharge impacts associated
                                                                                                                                                               with the PML project. In the case of DWD a schedule for these evaluations
  $$             Paul Hart    NA     11/14/2012
                                                                                                                                                               has been presented. In the case of CalAm, the project relies upon prior
                                                                                                                                                               determinations that the project would have no significant impacts from
                                                                                                                                                               intake or brine disposal
                                                (vii) If DWD is a large regional project, with large upfront fixed costs, and the DWD analysis assigns
                                                                                                                                                               The extent of Phase 2 facilities installed during Phase 1 is limited and
  $%             Paul Hart    NA     11/14/2012 only a percentage of those costs, who is paying for the rest and what are the risks that such costs are
                                                                                                                                                               accounted for in our evaluation.
                                                ultimately passed onto the Peninsula customers?




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DRAFT REPORT

                              Page       Date of
  No.      Comment By                                                                               Comments                                                                                   Response/Action
                               No.      Comment

                                                   Expressed concern that SPI used data from PML’s July submittal, but should have used the updated              Our evaluation included all information provided by PML up to October 15,
  $&           Nader Agha      NA       11/14/2012 October 2012 submittal.                                                                                       2012. We are not aware of any specific inconsistencies with information
                                                                                                                                                                 presented in the draft report.
                                                     Also expressed disagreement with the report’s schedule and believes the environmental document PML Both the PML and DWD have suggested an EIR/EIS review schedule
                                                     has produced, which he referred to as a “focused EIR”, would expedite the schedule.                         which is potentially shorter than the timeframe presented by the CPUC.
                                                                                                                                                                 The report continues to present a generic schedule which is longer than
  $>           Nader Agha      NA       11/14/2012
                                                                                                                                                                 suggested by the project proponents. We do not see adequate rationale to
                                                                                                                                                                 suggest that the EIR for PML or DWD can be completed more quickly than
                                                                                                                                                                 the CalAm proposal.
                                                     Disagreed with the cost numbers developed by SPI as inconsistent with the estimates PML has already All costs were evaluated on a consistent basis across all three projects.
                                                     made                                                                                                        The primary cost increase for PML was that associated with a higher
  $?           Nader Agha      NA       11/14/2012
                                                                                                                                                                 overall project contingency, which we consider warranted at this stage of
                                                                                                                                                                 development.
                                                     In trying to understand a few charts, I repeated the math, but found errors. This will not ruin your day,
                                                     but there are significant math errors on two charts. (for Cal Am and DWD, not PML).
                                                     Both tallies relate to the same items, but erroneously.
                                                     Chart 5-3 CAW, and chart 5-5 DWD.
                                                                                                                                                                 The Intake/Outfall cost category in the table includes fixed facilities as well,
                                                     In Line 8, Plant Facilities (PF) Subtotal All are wrong for CAW and DWD. Footnote 2 referred to             including storage tanks and pump stations. We will amend the table to
  %@           George Riley   5-6,5-7   11/12/2012
                                                     excluding 'off site trenched pipelines', which are Intake/Outfall and distribution. Deducting the numbers break the costs out separately so that costs within the table can be
                                                     in the chart does not give you the subtotals shown.                                                         calculated from the information shown.
                                                     The subtotal seems like an attempt to isolate some costs for better understanding, but these subtotals
                                                     are not used any where else in the report. At least I could not find another reference. Maybe these
                                                     subtotals have been used in financial models (yours?), but I doubt it. That is why I think it will not ruin
                                                     your day, or SPI either.
                                                     [Was] the periodic replacement of the slant wells factored into the cost analysis for CalAm's proposed No, though the issue will be investigated in a supplemental evaluation
  %+           George Riley    NA       11/14/2012
                                                     project?                                                                                                    following the final report due in January 2013.
                                                     What is the state of ownership at the end of the 30 year analysis period (terminal year) and can that be
                                                                                                                                                                 The cost evaluation included a 30-year term for the purposes of the report.
  %!           George Riley    NA       11/14/2012   factored into the analysis? (since presumably all of the plants operate for longer than 30 years)
                                                                                                                                                                 Presumably lease payments for DWD would continue past that time.
                                                     (i) Where is each project in terms of site control and does it introduce more variability than reflected in   Site acquisition is not considered a significant barrier to any of the
  %"           George Riley    NA       11/14/2012
                                                     the report?                                                                                                   candidate projects.
                                                     (ii) Will an EIS (federal review) be required of Cal-Am and what effect would it have on the Cal-Am           The CPUC has solicited input in the scoping hearings to determine if a
                                                     schedule?                                                                                                     Federal EIS is required. Depending upon the approach to compliance, an
  %#           George Riley    NA       11/14/2012
                                                                                                                                                                   EIS could add 4 months to up to two years to the schedule. Text has been
                                                                                                                                                                   revised to note this uncertainty.
                                                   (iii) The proprietary intake is an unknown – when will more information become available and what               The seawater intake is not proprietary, but rather the warming system.
  %$           George Riley    NA       11/14/2012 impact will it have on the analysis?                                                                            Information will be available once agreements have been finalized between
                                                                                                                                                                   DWD and Dynegy, presumably in the next two months.
                                                   (iv) Is the additional capital and operating costs related to extraction, treatment, and return of Salinas
  %%           George Riley    NA       11/14/2012                                                                                                                 Yes, for the Cal Am project.
                                                   Valley groundwater are fully included in the costs of potable water delivered?
                                                   (v) it appears there are several items in the Cal-Am schedule being performed simultaneously – can              The PML Schedule has been revised in the text. DWD has shown a
  %&           George Riley    NA       11/14/2012 more tasks be done in parallel to shorten the other projects’ schedules?                                        proponent's proposed schedule which is substantially shorter than shown in
                                                                                                                                                                   the original draft. The Text comments on this change.
                                                   Profit included as a cost: Apples to apples is incomplete without some component (or comment) about
                                                   profit. Cal Am will not undertake a project without a profit component. I asked DWD (2 people) if
                                                   there was profit built into its numbers, and the answers were yes. SPI expanded those numbers, so if
                                                   profit was already built in, you expanded profit as well. Not apples to apples.                                 Cal Am's cost of financing will be adjusted to incorporate their costs,
                                                   I also asked Nader Agha if profit was built into PML numbers. He said no, since most of his asset sale          including profits. DWD included their profit in the O&M cost category
  %>           George Riley    NA       11/22/2012
                                                   numbers were based on depreciated or discounted values, and he does not seek to make a profit on the            labeled "Other Proponent Expenses". The cost of PML's site was included
                                                   desal project. Since this is not easy for apples to apples, I have these questions: a) Can you generate         as $25M from their supplied documentation.
                                                   an apples to apples for an estimated cost component for profit? b) If profit is built in for DWD, should
                                                   you exclude it from DWD, or add it to Cal Am? c) Could you verify if profit is in the PML project at all,
                                                   and if so how, and if yes, how do you present it?




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                                                                             Re4ieA!Co66en>s!and!Responses


DRAFT REPORT

                              Page    Date of
  No.      Comment By                                                                           Comments                                                                                    Response/Action
                               No.   Comment

                                                Profit excluded as cost: If profit is not to be in your comparisons, it should be specifically commented
                                                on as needing further evaluation. Cal Am will undergo a deep review by Division of Ratepayers
                                                Advocates in CPUC procedures. There is no comparable deep review for DWD or PML, unless it
  %?           George Riley   NA     11/22/2012 occurs by local agencies. So profit has two tracks for review, and should not be treated casually. It will     See response above.
                                                be a known component of Cal Am costs, and so far is relatively unknown for DWD and PML. Will you
                                                suggest a procedure for evaluating costs for profit, or a way to address profit and other variable costs
                                                that SPI excludes from its report?
                                                Schedule question #1. You have indicated you will review these again. I point out one item--Cal Am
                                                has several parallel tracks in its schedule--EIR, CPCN and slant well testing. These are expected to
                                                merge at later dates. On the other hand, DWD and PML have sequential linear tracks, where similar              CalAm has presented a revised schedule for the project. This has not been
                                                steps are not run in parallel. Of course your schedule layout has more time for the two at ML, and             fully analyzed but text has been added to note the schedule risks
  &@           George Riley   NA     11/22/2012 much less time for Cal Am. Your recommended track is linear yet you make no acknowledgement of                 associated with delay of the test wells. DWD has presented a proponent's
                                                the higher risk of Cal Am's sequential tracks, i.e., the potential for litigation for procedural grounds.      schedule which substantially shortens the project schedule and this is
                                                Potential litigation based on inadequate time or consideration of related matters will be a significant        commented upon. PML schedule has been corrected
                                                risk. You should fully acknowledge these differences, unless you intend to correct for them.

                                                Schedule question #2. Section 6.3.1 on PML, SPI refers to an existing NPDES permit and a finding by
                                                                                                                                                               The report duly notes that it is possible that PML can certify an EIR without
                                                RWQCB that "use of up to 60 MGD of seawater through the existing intake structure in Moss Landing
                                                                                                                                                               a detailed analysis of the effects of operation of the intake without detailed
                                                Harbor would have negligible potential impingement and entrainment impacts." SPI observes these
                                                                                                                                                               evaluations of the effect upon the marine environment. The schedule in the
  &+           George Riley   NA     11/22/2012 facts, yet concludes that PML schedule will require deeper analysis (and delay) because of speculative
                                                                                                                                                               report has not been revised. Based upon experience with other ocean
                                                comparisons to a "no-project alternative". Furthermore PML has an alternative intake option using its
                                                                                                                                                               desalination proposals in California, it is presumed that substantial
                                                large 54" to 60" discharge pipe for inserting a new intake pipe. Can SPI reconsider its conclusions on
                                                                                                                                                               evaluations of this potential impact would ultimately be required.
                                                the PML schedule with a greater reliance on the facts?
                                                Comparing "existing infrastructure and entitlement" (PML) to "design and build" (Cal Am and DWD).
                                                                                                                                                               Site control is an advantage to PML and the text has been revised on the
                                                SPI has made no analysis of the different schedule impacts between two projects (Cal Am and DWD)
                                                                                                                                                               other projects to note the risks associated with this issue. Permit history
  &!           George Riley   NA     11/22/2012 that have no or limited site control, no permit history for intake and/or discharge, and no entitlements for
                                                                                                                                                               has not been considered a factor. The potential entitlement of prior permits
                                                those permits. Whereas PML has all of the above, which could be positive elements for expediting the
                                                                                                                                                               is noted in the original text and has not been revised.
                                                schedule. Can SPI comment on this?
                                                (i) Slant wells appear to be a large cost component – is it worth it relative to the use of Ranney wells?
  &"           John Narigi    NA     11/14/2012                                                                                                                The costs are comparable.
                                                  (ii) What would be the difference in cost?                                                                   Not significant; potentially slightly less for the Ranney alternative due to
  &#           John Narigi    NA     11/14/2012
                                                                                                                                                               reduced connecting piping requirements.
  &$           John Narigi    NA     11/14/2012 (iii) Where is each project in the schedule right now?                                                         As presented, beginning in October 2012.
                                                (iv) Is the operating assumption of running the Cal-Am facility at 98% capacity realistic or sensible –
                                                                                                                                                               We consider it reasonable based on the level of equipment redundancy
                                                should capacity be larger?
                                                                                                                                                               proposed. At base however, our evaluation did not consider plant sizing;
  &%           John Narigi    NA     11/14/2012                                                                                                                rather we sought to use consistent sizing/redundancy criteria across the
                                                                                                                                                               three projects to provide a balanced cost evaluation. Ultimately, plant
                                                                                                                                                               capacity is an issue for the CPUC and project proponents.
                                                  (v) What is the schedule for slant well testing and Coastal Commission approval, and does the Cal-Am     The schedule will be updated to reflect the new date, currently forecast as
  &&           John Narigi    NA     11/14/2012
                                                  schedule adequately reflect it?                                                                          Nov. 2013, in a supplemental report due in January 2013.
                                                  (vi) What impact will the groundwater replenishment CEQA delay have on the overall Cal-Am CPUC           The project EIR for CalAm is presumed to cover the larger size project that
                                                  application and schedule?                                                                                does not depend upon groundwater replenishment project moving forward.
  &>           John Narigi    NA     11/14/2012                                                                                                            This consideration of maximum potential impacts is appropriate and should
                                                                                                                                                           prevent substantial delays from occurring should the groundwater
                                                                                                                                                           replenishment project be aborted or delayed.
                                                (vii) What would the two Moss Landing projects charge Cal-Am as the wholesale cost of water – how is The structure of a future water supply agreement among the parties is
  &?           John Narigi    NA     11/14/2012
                                                that to be determined?                                                                                     outside the scope of our evaluation.
                                                (viii) What are the cost and schedule issues, if PML infrastructure is determined to be in worse condition The major schedule drivers relate to environmental and permitting issues.
                                                than described?                                                                                            Presumably a more detailed assessment of current infrastructure condition
  >@           John Narigi    NA     11/14/2012                                                                                                            would be undertaken as part of the predesign process. There is sufficient
                                                                                                                                                           time within the proposed construction schedule to accommodate
                                                                                                                                                           rehabilitation of facilities as needed.




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DRAFT REPORT

                               Page       Date of
  No.      Comment By                                                                               Comments                                                                                 Response/Action
                                No.      Comment

                                                      (i) the water quality of each proposed project appears to vary, as described in chapter 4 – is there a
                                                                                                                                                                 The information provided in Chapter 4 summarizes the quality produced by
                                                      common standard, and does the financial analysis bring them to the common standard?
                                                                                                                                                                 the proponents' proposed systems. In our cost evaluation, we assumed
  >+            Rick Riedel     NA       11/14/2012
                                                                                                                                                                 each treatment facility would produce a consistent quality of water; and
                                                                                                                                                                 amended proponent costs accordingly.
                                                      (ii) We should be reminded that the “fatal flaw” sections are technical in nature, not legal and/or
  >!            Rick Riedel     NA       11/14/2012                                                                                                              Agreed, will update text.
                                                      political, which do pose significant risk
                                                      (iii) Does the analysis adequately address whether sufficient dispersion of brine discharge can be         Brine dispersion was not included in the evaluation, beyond a review of the
                                                      achieved, and if not, what is the incremental cost to do so?                                               Trussell Technologies Inc. investigation which we found credible at this
  >"            Rick Riedel     NA       11/14/2012                                                                                                              stage. Presumable the issue will be investigated further as the project
                                                                                                                                                                 predesign and permitting processes advance. We do not consider it a
                                                                                                                                                                 large technical concern.
  >#            Rick Riedel     NA       11/14/2012 Change statements to “ … no [technical] fatal flaws were found …”                                            Agreed.
                                                    Add “Legal and financial considerations, such as water rights and payment schedules (such as
                                                    Surcharge 2 by Cal Am), were not evaluated.” You may want to elaborate on why it is inappropriate to
  >$            Rick Riedel     NA       11/14/2012 consider potential cost associated with financing the project in this type of report. Also, you may want     Agreed.
                                                    to provide caveats for the accuracy of the estimated costs and that the cost analyses given are for
                                                    evaluating the feasibility of the alternatives and are not intended to reflect potential actual costs.
  >%            Rick Riedel     NA       11/14/2012 How were the finished water quality values derived shown in the tables in Section 4?                         They were extracted from information provided by the proponents.
                                                    Do the differing finished water quality values in Section 4 affect the cost comparisons given in Section
                                                                                                                                                                 The cost evaluation we prepared did assume a consistent product water
                                                    5? If so, is it possible that the cost analyses be revised so that every alternative’s treatment scheme is
  >&            Rick Riedel     NA       11/14/2012                                                                                                              quality; and proponent costs were adjusted to include the required
                                                    modified (e.g. not require 40% second pass) so as to provide the same finished water quality?
                                                                                                                                                                 treatment process equipment.
                                                    Two of the potential desal projects, DWD and PML, are proposing to use open ocean intake without           Minimal text has been added to Section 6 of the report to discuss Coastal
                                                    considering any alternatives to open ocean intake. My understanding is the Coastal Commission would        Commission and NOAA policies. However, time and budget constraints do
                                                    consider open ocean intake in the event that it is shown to be the "least environmentally harmful          not allow a thorough evaluation of these comments. The report notes that
  >>            Rick Riedel     NA       11/21/2012 feasible alternative." That is, the Coastal Commissions Policy is to not allow an open ocean intake        this should be a focus of future analyses. It is desirable though uncertain
                                                    unless it is demonstrated that other alternatives are unfeasible. To my knowledge, no work has been        that the CPUC EIR and proponents' EIR's would offer a comparison of
                                                    performed to date by either DWD or the PML to demonstrate this.                                            open intake and subsurface intakes for comparison. The JPA has made
                                                                                                                                                               thoughtful comments in the scoping hearings which would improve the
                                                      Should DWD be given credit (i.e. either a greater RO flux or lesser energy usage) to account for the     Energy costs will be adjusted to account for differences in pumping
  >?            Rick Riedel     NA       11/21/2012
                                                      preheat?                                                                                                 requirements among the three proponent projects.
                                                      Page 3-11 states that PML will pretreat with coagulant and UF. Is it cost effective to remove coagulant Coagulant can be used successfully with MF/UF. The overall PML
                                                      with UF? Is it necessary to add flocculation prior to filtration?                                        pretreatment design was maintained as proposed with the understanding
  ?@            Rick Riedel     3-11     11/21/2012
                                                                                                                                                               that a planned one year pilot program would be used to finalize the process
                                                                                                                                                               design.
                                                      The existing infrastructure at PML may be a liability, instead of an asset. For example, I believe that
                                                      California Dept of Health requires all pumps for water systems to be lead free. Most older pumps         Information on the existing equipment was not provided. In general, the
  ?+            Rick Riedel     NA       11/21/2012   contain some lead as an alloying element. Do the existing PML pumps contain lead? Another                contingency allowance and proposed rehabilitation allowances provided by
                                                      example, many older storage tanks contained PCBs in the caulking. Do any of the PML tanks contain PML should be adequate to cover potential rework.
                                                      PCBs at a level that may be of concern?
                                                      The lower O&M costs for PML is counterintuitive considering the feed water from the harbor is            Cal Am has a high pumping cost associated with it's supply wells along
                                                      potentially both highly variable and contains more organics than the other alternatives. That is, O&M    with a higher cost of electricity; while DWD had an artificially high cost
  ?!            Rick Riedel     NA       11/21/2012
                                                      costs for PML are estimated to be lower than the other 2 alternatives. I would expect PML’s O&M costs associated with its proponent expense category as described above. The
                                                      to be greater.                                                                                           costs will be adjusted in the final report.
  ?"           Mayor Burnett    ES-9     11/13/2012   "10,730 AFY in access of its valid right of 3,376 AFY." Should be "in excess of..."                      Noted, will correct.
                                                      "In general, DWD proposes to provide a product supply that is compliant with all applicable drinking
  ?#           Mayor Burnett    4-4      11/13/2012                                                                                                            We consider the terms synonymous but will change to non-corrosive.
                                                      water regulations, is non-aggressive..." Should this be "non-corrosive?
                                                      DWD and PML appear to underproduce in the 5,500 AFY scenario as shown, for example, on page 4- Chapter 4 presents the proponent proposed system designs; along with our
  ?$           Mayor Burnett    4-5      11/14/2012
                                                      5?                                                                                                       proposed adjustments to their respective facility capacities.
                                                      It would useful to identify the key variables that affect cost and schedule and request SPI do a
                                                                                                                                                               Additional sensitivity analyses related to cost of energy and slant well
  ?%           Mayor Burnett    NA       11/14/2012   sensitivity analysis on those. For example, they already have done sensitivity analysis on the cost of
                                                                                                                                                               replacement will be included in a future supplement to the final report.
                                                      electricity at least for Cal-Am's project.
                                                      Determine how sensitive the cost effectiveness of DWD is to the assumption that they will be able to     The economics would not change much as the major shared cost
                                                      build a 25,000 AFY plant. If that does not come to pass and the capital costs of pipes, etc will need to component is the planned intake pipeline which is not part of their costs.
  ?&           Mayor Burnett   5-7/5-8   11/14/2012
                                                      be spread across a smaller volume of water, how much more expensive is that water per acre foot?         Most facilities would be built for the required plant capacity increment in
                                                                                                                                                               Phase 1 and include those costs alone.

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                                                                              Re4ieA!Co66en>s!and!Responses


DRAFT REPORT

                               Page    Date of
  No.      Comment By                                                                            Comments                                                                                Response/Action
                                No.   Comment

  ?>           Mayor Burnett   NA     11/14/2012 What happens to PML and DWD if MLPP is shut down or once-through cooling ceases?                           It is a risk that will need to be evaluated as the project advances.
                                                 For PML, how do costs change if existing intake system is unusable?                                        From a technical perspective, there is no reason to believe the existing
  ??           Mayor Burnett   NA     11/14/2012
                                                                                                                                                            intake could not be reused.
                                                   How should we evaluate schedule risk versus cost of water?                                               There are barriers to implementation of any of the three projects. With the
  +@@          Mayor Burnett   NA     11/14/2012                                                                                                            2016 deadline, schedule risk should likely have primacy in the absence of
                                                                                                                                                            gross cost differentials.
  +@+          Mayor Burnett   NA     11/14/2012 How much will it cost our communities to have a project delayed by 6 months?                               Unknown.
                                                 What can be learned about schedule risk (especially for open ocean intake) from the Poseidon               They are currently not the preferred alternative within State regulatory
                                                 experience?                                                                                                authorities and therefore subject to unknown schedule risk. The overall
  +@!          Mayor Burnett   NA     11/14/2012
                                                                                                                                                            regulatory framework has changed since Poseidon started its project, so
                                                                                                                                                            it's difficult to draw firm conclusions.
                                                 Questioned the use of Surcharge 2 for funding a portion of the Cal-Am project, suggesting that it should
                                                                                                                                                            The surcharge issue is currently being examined through the CPUC and is
  +@"          Doug Wilhelm    NA     11/14/2012 be made available to the public projects or removed from the Cal-Am analysis – especially since the
                                                                                                                                                            not included in the scope of this evaluation.
                                                 CPUC may not allow it in whole or in part.
  +@#          Dale Hekhuis    NA     11/14/2012 Also questions the use of Surcharge 2.                                                                     See above.
                                                 Questioned why the capital costs for the Cal-Am project are so much lower than Cal-Am’s published
  +@$          Safwat Malek    NA     11/14/2012                                                                                                            Cal Am's cost of financing will be adjusted in the final report.
                                                 estimates in their application and presentations to the community.
  +@%           Dave Stoldt    5-8    11/13/2012 two lines up from bottom – “Cal-Am” should read “DWD”                                                      Will correct.
                                                 Replace Text in Footnote 3: Capital recovery factor for DWD and PML based on an interest rate of
  +@&           Dave Stoldt    5-4    11/30/2012                                                                                                            Will update.
                                                 4.0% and term of 30 years; based on an interest rate of 8.49% and 30 years for Cal-Am.
                                                 A Capital Recovery Factor (CRF) is used to convert a single up-front capital cost into an annual amount
                                                 to be recovered, as if the money was repaid as a loan, based on an interest rate and time period. As
                                                 listed in Note 3 on Table 5-2, a CRF was used for the DWD and PML projects at an interest rate of 4.0
                                                 percent. This rate approximates the cost of tax-exempt borrowing for publicly financed projects which
                                                 would likely be applicable to DWD and PML. In this case, the CRF equals 0.05783

                                                 Cal-Am may not have access to public financing and could have a pre-tax weighted cost of capital
                                                 based on 5.0 percent market-rate debt (their authorized debt return is 6.63%) and 9.99% percent equity
                                                 return, grossed up for income and ad valorem taxes. This would result in higher annual costs for Cal-Am
  +@>           Dave Stoldt    5-5    11/30/2012 than shown. However, there are additional differences in how public versus private capital investments Will update.
                                                 are amortized, the impacts of which are not analyzed in this report. The Monterey Peninsula Water
                                                 Management District has computed that for Cal-Am, a CRF representing the average annual capital
                                                 recovery over a 30-year period equals 0.92933 which would result as if the interest rate was 8.49%.
                                                 This CRF is computed as follows:

                                                   {[(Pre-Tax Equity Return: 9.99% x 53% x 1.69 gross-up) +(Pre-Tax Debt Return: 5% x 47% x 1.69)-
                                                   (Interest Paid Tax Off-Set: 5% x 40.25% effective tax rate divided by .99736 collectibles rate)] +(Ad
                                                   Valorem Taxes: 1.05%)]}/2 + (3.33% annual depreciation) = 0.092933 proxy CRF




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                                                                     MPRWA!E'ALUATION!OF!SEAWATER!DESALINATION!PROJECTS
                                                                                 No4e67er!2012!Draf>!Repor>
                                                                               Re4ieA!Co66en>s!and!Responses


DRAFT REPORT

                               Page    Date of
  No.      Comment By                                                                             Comments                                                                                 Response/Action
                                No.   Comment

                                                 A<B*6*<B*<5!-(C5!CD*CE8<)!"
                                                 !!!!!!F*7*4(G!;,<5D=!(),!H6*4D(6=!(!I*(4J!:(G"1;!64,BKC*B!(<!8<5*4<(G!=5KBI!,<!C,;6(4(587*!C,=5=!,-!
                                                 (!<*9!9(5*4!64,L*C5M!9D8CD!8<CGKB*B!(N,K5!++!B8--*4*<5!,658,<=!C,7*48<)!B*=(G8<(58,<M!1F/!H(OK8-*4!
                                                 =5,4()*!P!4*C,7*4IJM!Q0/!H)4,K<B!9(5*4!4*C,7*4IJM!C,<=*47(58,<M!(<B!6*4D(6=!,5D*4!=,K4C*=2!!RD*! This study evaluated costs provided by the proponents as of October 15,
                                                 ,658,<=!C,7*4*B!7(4I8<)!C,;N8<(58,<=!,-!5D*=*!9(5*4!=,K4C*=!(<B!5D*!C,=5=!-,4!*(CD!,658,<M!                2012 for their current projects. Evaluation of other cost estimates was not
                                                 8<CGKB8<)!B*=(G2!!0*GGM!8-!I,K!4*78*9!5D(5!:(G"1;!=5KBI!A!5D8<E!I,K!98GG!-8<B!5D(5!5D*!*=58;(5*B!C,=5=!,-! a part of our evaluation.
                                                 5D*!:(G"1;!9(5*4!64,L*C5!HB*=(GJ!8<!5D(5!=5KBI!7(4I!)4*(5GI!-4,;!5D*!*=58;(5*B!C,=5=!4*64*=*<5*B!8<!
  +@?          Larry Parrish   NA     11/27/2012                                                                                                            With regard to the proponent questionnaires, we did evaluate their
                                                 5D*!F'A!/*6,45!(<B!5D*!-8<(<C8(G!(<(GI=8=!64*6(4*B!NI!5D*!.'0.3!-,4!5D*!.'/012!!0DI!8=!5D*4*!              responses as part of the information we reviewed and considered as part of
                                                 =KCD!(!B8--*4*<C*!8<!C,=5=!N*59**<!5D*=*!59,!=5KB8*=S!!0D(5!D(=!CD(<)*BS                                   work. Where we found the information was insufficient, we asked
                                                 !!!!!1G=,M!*78B*<5GI!5D*!5D4**!64,6,<*<5=!,-!B*=(G!64,6,=(G=!(<=9*4*B!(!$$!OK*=58,<!OK*=58,<(84*2!!A=! additional questions of the proponents and/or adjusted costs in our
                                                 5D*4*!8<B*6*<B*<5!7*48-8C(58,<!,-!5D*!8<-,4;(58,<!5D(5!9(=!64,78B*B!8<!5D,=*!OK*=58,<(84*=S!!A-!<,5M! economic evaluation.
                                                 5D*4*!C*45(8<GI!=D,KGB!N*2!!R,!N*!=K4*M!1TT!,-!5D*!8<-,4;(58,<!64,78B*B!NI!:(G"1;M!303M!(<B!'.T!
                                                 =D,KGB!N*!7*48-8*B!NI!8<B*6*<B*<5!=,K4C*=2


                                                 R,5(G!:,=5=!,-!3*=(G!"
                                                 !!!!!1<I!*=58;(5*=!,-!5D*!C,=5!,-!(!<*9!B*=(G!6G(<5!.UFR!8<CGKB*!1TT!,-!5D*!C,=5=!(==,C8(5*B!985D!5D*!
                                                                                                                                                          We believe all applicable costs related to the facility permitting, design and
  ++@          Larry Parrish   NA     11/27/2012 C,<=54KC58,<!,-!5D*!B*=(G!6G(<52
                                                                                                                                                          construction have been considered.
                                                 RD8=!9,KGB!8<CGKB*!5D*!V??!;8GG8,<!=K4CD(4)*W!-8<(<C*!CD(4)*=W!64,-85=!NI!5D*!NK8GB*4!,-!5D*!6G(<5!H:(G"
                                                 1;JW!G858)(58,<!C,=5=W!9*GG=W!G(<B!(COK8=858,<W!*5C2!!1TT!C,=5=!;K=5!N*!8<CGKB*BX!X!X
                                                 3*G(I=!"
                                                 !!!!!3*G(I=!8<!6*4;8558<)M!C,<=54KC58,<M!G858)(58,<M!6,G858C(G!B8CE*48<)M!*5C2!98GG!K<B,KN5*BGI!8<C4*(=*!5D*!
                                                                                                                                                               The recommended 30 percent overall project contingency should be
  +++          Larry Parrish   NA     11/27/2012 -8<(G!648C*5()!,-!5D*!B*=(G!64,L*C5!(<B!5D*=*!=D,KGB!(G=,!N*!8<CGKB*B!8<!5D*!5,5(G!C,=52
                                                                                                                                                               sufficient to cover many of the unknowns related to the project at this time.
                                                 RD8=!;(I!*<5(8G!=,;*!B8--8CKG5I!8<!*=58;(58<)!5D*!C,=5=!BK*!5,!B*G(I=M!NK5!=D,KGB!N*!8<CGKB*B!(5!G*(=5!
                                                 (=!*=58;(5*B!C,=5=2
                                                 Missing the deadline -
                                                     There is a deadline in the CDO 95-10 which could also effect the final pricetag of desal. My opinion
                                                 is that the water will not be shut off - affected cities and the county can declare a state of emergency
                                                 which will override the order by the State Water Board.
                                                 However, some rationing may occur. If rationing does occur, this could also affect the final price of
                                                 desalination. Cal-Am has stated publicly several times that if conservation (also known as rationing)
                                                 increases, the cost of water per acre-foot ($/AF) will also increase in some proportionate formulized
                                                 fashion. Cal-Am has fixed costs and are legally entitled to recover those costs. The actual amount of The outcome of a missed deadline is speculative at this time; and an
  ++!          Larry Parrish   NA     11/27/2012 water they distribute is then somewhat irrelevant. If they sell a million AF of water, or ten million AF,
                                                                                                                                                             evaluation of the impacts are outside the scope of our evaluation.
                                                 they will still attempt
                                                 (successfully) to recover a relatively similar amount from the ratepayer based on their expenses. This
                                                 means a RATE INCREASE. Well, such a rate increase will increase the overall price per AF of water ,
                                                 which will likewise affect the final average $/AF of the overall project. This should be factored into your
                                                 evaluation also.
                                                     I guess you need to determine how soon each project can be completed, and of course the longer it
                                                 takes to complete the project, the more expensive it will be.
                                                 Cost controls -
                                                     This may not figure into your evaluation at this time, but upon selection of and approval of a final
  ++"          Larry Parrish   NA     11/27/2012 project, there should be sufficient cost control guarantees written into the final agreement.                 Noted.
                                                 Cost overruns should be accounted for and costs beyond that should be borne by the builder of the
                                                 project.




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                                                                    MPRWA!E'ALUATION!OF!SEAWATER!DESALINATION!PROJECTS
                                                                                No4e67er!2012!Draf>!Repor>
                                                                              Re4ieA!Co66en>s!and!Responses


DRAFT REPORT

                            Page       Date of
  No.      Comment By                                                                             Comments                                                                                    Response/Action
                             No.      Comment

                                                 The Report makes it sound like the fact that Cal Am's slant wells will be in the path of future shore
                                                 erosion in the next 40 years a minor issue because the life of the project is only 30 years. That seems         Cal Am is currently evaluated design and location of the slant well facilities
                                                 insane to me. We are spending 200+ million on a project whose life is only 30 years? If we have to              that will place major infrastructure outside of the erosion zone. Further, a
  ++#          Alan Haffa    NA       11/27/2012
                                                 redrill the slant wells in 30 years, a short window for such a large capital project if you ask me, then that   supplemental evaluation will examine the impact of increase replacement
                                                 cost should be factored into their plan. In my view, the shore erosion is a "fatal flaw" for the CalAm plan.    frequency for the slant wells.

                                                   The Report assumes that all three projects will spend the same amount on financing, but is that a
                                                   reasonable assumption? My understanding is that Cal Am cannot borrow at the preferred rates a
                                                   government body can, but the other two projects will not go forward without a sponsoring public agency
  ++$          Alan Haffa   5-4,5-5   11/27/2012   and the correspondingly lower bond rates. This seems like a large cost factor that the SPI report             Cal Am's cost of financing will be adjusted in the final report.
                                                   ignores essentially. (See note 3 and bottom of page 5-4 and 5-5, which says that a "uniform capital
                                                   recovery factor was used across all three projects at an interest rate of 4.0 percent."). My estimate
                                                   based on the percents given on 5-5 is that financing for Cal Am would cost 22 Million more.
                                                   The Report claims on page 3-3 that there will be no permanent aesthetic impacts from CALAms project,
                                                                                                                                                                 The intake pumps will be located in subgrade vaults, limiting the surface
  ++%          Alan Haffa    3-3      11/27/2012   but their slant wells will occupy 700 feet of shoreline with industrial equipment in a place that currently
                                                                                                                                                                 impacts.
                                                   has nothing like that--how can that not be a permenant negative aeshtetic impact?
                                                   The claim on page 3-7 about DWD stretches credibility: "there is no expereince with the effect of
                                                   warming a deep source supply. There is potential for the increase in temperature to cause an increase
                                                   in biological activity and associated biological fouling within the treament process." Really? They are       Biofouling of RO membranes is a common challenge for open-intake
                                                   taking water from deep under the ocean where there is far less organic material to begin with, and            seawater desal facilities and is not primarily a consequence of multicellular
                                                   filtering it. Now, are we supposed to believe that in the amount of time it takes to warm the water and       marine organisms, but rather bacteria--which can be present at depth.
  ++&          Alan Haffa    3-7      11/27/2012
                                                   pipe it to the treatment center that this deep water will suddenly sprout with life? It seems like a very     Generally, bacterial growth rates and patterns can accelerate with
                                                   weak assumption ont he part of SPI and while it is true that there is no experience proving otherwise,        increases in temperature--a feature that has been observed at facilities
                                                   there is also no experience proving that it will occur and common sense argues against it. How will           treating the warm water return from power plants.
                                                   source water that is lower in "turbidity and suspended solids" than the other two projects suddenly
                                                   experience an outbreak in biological fouling just because of warming the water?
                                                   On page 3-8 "the nature of the agreement between DWD and Dynegy is still confidential between the
                                                                                                                                                                 The agreement is nearing completion and should be available for review
  ++>          Alan Haffa    3-8      11/27/2012   parties" IS a legitimate concern. The public needs to know the nature of that agreement to predict long
                                                                                                                                                                 soon.
                                                   term costs and that is a non-starter to any negotiations with DWD.
                                                   On page 3-10 the report claims that PML is in a flood plain. How serious is this threat? How often has
  ++?          Alan Haffa    3-10     11/27/2012   the area been flooded in the past 100 years? Can the facility be built to be flood protected?                 The overall risk is low as described above.

                                                 The pipe disrepair in PML is legitimate concern but it seems like it should involve less permitting costs
                                                 to repair existing pipes rather than seek permission to install new ones. It seems like given the concerns As stated above, PML has included costs for repair of its intake and outfall
  +!@          Alan Haffa    NA       11/27/2012 with the pipes and pumps, PML should assume all new equipment in costing the project. In comparing facilities; along with an overall 30% cost contingency we applied in our
                                                 PML and DWD I would like to see a cost comparison that assumes new equipment/capital for PML.              evaluation.

                                                 On page 4-6 the report argues that an "unknown level of organics may be prsent in the harbor-extracted
                                                 supply." This seems reasonable; however, it also seems likely for the Cal Am slant well, which after all,       Disagree, the level of organics in well supplies is generally lower than in
  +!+          Alan Haffa    4-6      11/27/2012
                                                 is taking water from beneath sand dunes. The only project that can reasonable assume a low level of             open intakes.
                                                 organics in source water is DWD.
                                                 The Report rightly assumes that DWD and PML will add second pass reverse osomosis, just like Cal
  +!!          Alan Haffa    NA       11/27/2012 Am proposes. We can't afford to spend this much money and then have a poor tasting supply of water.             Agreed.
                                                 That would be a horrible outcome
                                                 The report says that Cal Am will have to acquire land for its treatment facility that it does not own and
                                                 that it could use eminent domain. It wasn't clear to me that the costing included the cost of this land
                                                 acquisition and likely court related costs if it went to eminent domain. Aside from that, I don't know that
                                                 we want to be associated with a project that has to use eminent domain if other options are available.          The cost of eminent domain acquisition of Cal Am's site is not expected to
  +!"          Alan Haffa    3-2      11/27/2012 Based on this, I have even more concerns with the CalAm proposal both because of the Slant Wells                significantly increase cost or the overall project schedule. Cal Am is
                                                 (aesthetic impact AND erosion and cost of rebuilding) and the potential litigation over eminent domain.         actively engaged in acquiring its proposed site at this time.
                                                 Additionally, it is still the most expensive plan even when you assume comparable bond rates, which is
                                                 a bad assumption.

                                                   Moss Landing Commercial Parkway (MLCP) provided SPI with full responses to their requests for
                                                                                                                                                     We feel we fairly represented information provided by PML in our
  +!#          Don Lew       NA       12/4/2012    information regarding the proposed desal plant at MLCP. The information provided by MLCP has been
                                                                                                                                                     evaluation and report.
                                                   distorted in the evaluation prepared by SPI and does not accurately reflect our responses.


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                                                             MPRWA!E'ALUATION!OF!SEAWATER!DESALINATION!PROJECTS
                                                                         No4e67er!2012!Draf>!Repor>
                                                                       Re4ieA!Co66en>s!and!Responses


DRAFT REPORT

                         Page    Date of
  No.      Comment By                                                                     Comments                                                                                Response/Action
                          No.   Comment

                                            We will not continue to participate in a so-called comparison when the information provided to you for
  +!$          Don Lew   NA     12/4/2012                                                                                                              The report is solely the work product of SPI and KHC.
                                            comparison has been distorted, misinterpreted and changed without out permission.
                                            If you want information as to what we are referring to with regard to the inaccuracies please call me so   Per instructions from the MPRWA, all comments were to be provided in
  +!%          Don Lew   NA     12/4/2012
                                            the supporting documentation can be provided to you. I can be reached at 925-586-2433.                     writing.




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