Cal-Am’s (Sorry) Performance

Cal Am has provided our water since 1966. Customers have been lulled into relying on Cal Am. But the cost has been huge. It is now becoming alarmingly clear that the price has been enormous. Cal Am’s mismanagement is notorious, and can no longer be tolerated. Here is a short summary.

  1. Cal Am has depleted the basic water sources. It over-pumped the Carmel River to the extent that the State Water Resources Control Board issued a Cease and Desist Order in 1995 for Cal Am to reduce this pumping. In 2009 it further ordered Cal Am to specifically reduce pumping by about 70% by 2016.
  1. Cal Am over-pumped the Seaside Ground Water Basin to the extent that a local court ordered Cal Am to reduce that pumping, too.
  1. Cal Am allowed the San Clemente Dam to degrade, silt up and become useless for water supply.  The story goes so far beyond simply letting the Dam degrade, that we’ve dedicated an entire page call The Great Dam Robbery.
  1. Cal Am has made several efforts to generate a new water supply—four in the last 20 years, all of which have ended in failure. This includes two dams and most recently two Desals (one at Moss Landing and one in north Marina). Cal Am has shown either poor planning, poor management, poor judgment, poor decision-making, or all of the above.
  1. The California Public Utilities Commission has cooperated in, supported or approved each and every one of Cal Am’s actions, including the over-pumping. CPUC is an enabler of Cal Am’s mismanagement.
  1. In 2012 Cal Am embarked on a fifth project for a new supply, a resurrection of the failed Desal at north Marina. This proposal continues the inadequacies of no water rights, unproven slant well technology, source water unknowns, high costs and known litigation threats (both current and future). Cal Am continues to demonstrate arrogance and ineptness in planning new water supplies. The CPUC is again facilitating Cal Am’s effort.
  1. Cal Am so miscalculated its revenue requirements for 2010 and 2011 that it needed special CPUC permission to add surcharges to water bills to collect $25 million over four years.
  1. Meanwhile, Cal Am took $11.3 million in pre-tax profits in 2012 (22.5% of revenue) from customers. It has averaged $7 million in profits per year over the last 10 years, thus continuing to benefit from its sorry performance.
  1. Cal Am will take another $1.5 million in profit each year, for the next 20 years, for removing the San Clemente Dam, because the CPUC approved full profit under the ridiculous guise that it is a ‘used and useful’ project for the water utility. ‘Used and useful’ applies to projects that enhance or expand the water supply, not ones that eliminate it.

What Has Cal Am and CPUC Added to Ratepayer Costs?

Cal Am, with CPUC approval, has caused these additional costs to customers:

2004 Failed plans for ‘new’ San Clemente Dam $3 million
2007 Abandoned Desal project at Moss Landing $12 million
2007-2011 Failed Regional Desal Project (RDP) $32 million
2010, 2012 Settlement of NOAA fines for Carmel River damage $5 million
2012 CPUC approved full profit for San Clemente Dam removal (NPV) $21 million
2013 Additional San Clemente Dam costs $27 million
TOTAL so far (more coming on RDP and NOAA fines) $100 million*

*For perspective on $100 million, it could pay all of our water bills for the next 2 years!

 

What Does Cal-Am Arrogance Look Like?

Cal Am has a new proposal to CPUC for another Desal project. It is riddled with weaknesses:

  • Its project near Marina has no water rights—a failure noted in a prior local court decision.
  • Cal Am proposes using unproven slant well technology for intake source water.
  • Proposed source water is untested, and unproven in quantity.
  • Cal Am depends on ratepayer surcharge (contribution) of $103 million, without public support.
  • The $71 million surcharge passes all early risks to us ratepayers.
  • Investors are left with no risks, yet expect a large return as profit.
  • Peninsula ratepayers will pay more than 40% of the project cost, but will have no ownership stake in the assets.
  • Cal Am has opposed any public ownership of the Desal facilities.
  • Cal Am and CPUC agreed to bypass the longstanding county ordinance that requires public ownership of Desal facilities.
  • Cal Am made no attempt to arrange for a public partner.
  • Cal Am does not support public agency financing, which can lower costs.

Last Revised 5/29/13

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