Monterey Rate Application Satellite Systems May 13, 2008

2 Setting Your Water Rates: A 20-month Process Initial proposal filed November 30, 2007 Final application filed January 30, 2008 Public hearings in Monterey May 28 & 29, 2008 DRA report on their findings and review August 2008 Evidentiary hearings October 2008 Proposed decision by Administrative Law Judge April 2009 Final decision by CPUC Commissioners in June 2009 Final rates effective July 2009 * DRA = Division of Ratepayer Advocates, an independent entity of the CPUC

3 Filings for a Sustainable System 1.ConservationDecember 14, Current GRC + General Office January 30, 2008 For rates in 2009 – Rate of Return May San Clemente Dam Total Cost Recovery Future 5.Next GRC + Support FunctionsMay 2010 For rates in Coastal Water Project EIR & CPCNOn-going review 7.CWP Total Cost Recovery Future –Monterey Customers currently pay for Coastal Water Project preconstruction costs through a surcharge on the bill

4 Map of Satellite Systems Satellite systems Also: 1) Ralph Lane – 29 customer system located in Salinas 2) Chualar – 189 customer system located in So. Mo. Co.

5 Satellite Systems by the Numbers Total of seven separate water systems 15 wells with various treatment measures 27 storage tanks Multiple pressure zones 2,000 total customers 1,153 AF of water used per year 0.5 AFY per customer usage vs AF per customer on main system - 3 times higher Satellite peak day demands = 300% higher than average day demand Main system = 60% higher than average day demand Supported and operated by employees of the Monterey main system

6 Water Supply Sources Ryan Ranch, Hidden Hills, Bishop  Seaside Basin (Laguna Seca Subsystem)  Zero water allotment from adjudication  Allocations and tiered rates proposed Ambler Park & Toro  El Toro Groundwater Basin  Hydrologically contiguous to the Seaside Basin  Overdraft (removing more water than is being replenished each year)  Allocations and tiered rates proposed in Ambler Park, not Toro Ralph Lane & Chualar  Salinas Basin groundwater  Currently no water restrictions on use  No allocations proposed; No tiered rates proposed for Chualar

7 Seaside Basin Adjudication Changed Supply For Ryan Ranch, Hidden Hills & Bishop Decision issued March ,500 AF total reduction from recent pumping levels required by 2021 Zero AF allocation for Satellite Systems (Currently Use = 761 AF) Seaside Basin Satellite Systems will use the Seaside Basin customers (non-satellite) allotment for their water supply Seaside Basin Satellite System rates will be the same as main system rates (except Coastal Water Project and San Clemente Dam surcharges) Interconnects system with main system to alleviate Laguna Seca situation

8 Regulatory Impacts to Seaside Basin Supply 1979 – 1988 Historic 1995 – 2006WY st Seaside Reduction ULTIMATE Seaside Reduction Seaside Basin Coastal 2,700 AFY 4,000 AFY 3,191 AFY1,494 AFY Seaside Basin Laguna Seca Satellite Systems 210 AFY 700 AFY 271 AFY 0 AFY TOTAL2,910 AFY 4,700 AFY 3,462 AFY 1,494 AFY Over 50% reduction needed from 2009 WY

9 Ambler Park & Toro Water supply is from the El Toro basin Hydraulically connected to the Laguna Seca subarea of the Seaside Basin California American Water has 800 customers in the two systems Declining water levels while pumping is increasing El Toro Basin also have the following:  Hundreds of individual well users  2 commercial well systems  150 community water systems (mutuals) Geographic area of El Toro Basin greater than the Seaside Basin area Monterey County Water Resources Agency (MCWRA) conducted hydrologic study of Basin in 2007

10 El Toro Basin Hydrologic Study Conducted by Geosyntec for MCWRA Study completed in July 2007 Major source of groundwater replenishment is precipitation Groundwater overdraft conditions exist Water supply being maintained by reducing groundwater storage Hydraulically contiguous with the Laguna Seca area of the Seaside Basin Recommends a collaborative groundwater management program with Laguna Seca sub-area producers Need to asses potential risk of ground subsidence near Highway 68 due to continued decline of groundwater levels Need to evaluate alternatives to enhance water supply and promote conservation measures

11 California American Water Ambler Park & Toro Recommendations No water supply quantity enhancements proposed in this filing Continue to supply customers with water from the El Toro Basin through 2011 Currently systems are not interconnected Toro interconnected to Hidden Hills Rates less than main system customers Allocations and tiered rates proposed in Ambler Park No allocations or tiered rates proposed in Toro

12 Chualar & Ralph Lane Water supply from Salinas Groundwater Basin No current restrictions or fees imposed on use of groundwater basin water Cost to produce water through 2011 anticipated to be inexpensive Proposed rates are considerably less than other satellite systems and main system  No tiered rate structure proposed in Chualar  No allocations proposed  No mandatory conservation required No interconnection to other systems currently or proposed

13 Main System (35,000 Customers) Draft CDO Proposed Reduction Schedule Water Year Percent Reduction from 11,285 Goal Max End of Year Diversion Amount %9,592 AFY %9,028 AFY %7,335 AFY %5,642 AFY

14 Major Drivers of Rate Request $/Customer in Satellite Systems$4,500 $/Customer in Main System$4,600 Loss of Consumption 3% Capital Investment 62% Seaside Basin & Sand City 16% Labor 8% General Office 7% Other 4%

15 Rate Comparison for 20 ccf Residential 3x more than main system average use System Current Rate % Increase Main$131.18$153.16$170.21$ % Bishop$96.16$139.67$155.18$ % Hidden Hills$123.41$139.67$155.18$ % Ambler Park$88.07$129.08$143.42$ % Toro$57.56$123.74$128.41$ % Ralph Lane$85.66$100.19$102.10$ % Chualar$33.70$39.23$39.98$ % Ryan Ranch does not have residential customers

16 Summary of major items Total Overall Revenue Increase requested = 120% Satellite systems and main system customers could be more, depending on use and water allocations Satellite systems of Chualar and Ralph Lane – lower rates due to water supply situation Allocations and conservation rates (5 tier structure) implemented for all except Chualar, Ralph Lane and Toro Satellite Systems are high users of water, complicated systems, high amount of facilities, lack a long-term water supply (except Ralph Lane and Chualar) Customers on tiered rates could experience a 1,000% increase in bill if most of their water use is in the 5th tier.

17 Conservation application filing Further conservation needed due to reduced water supply $1.7M additional annual expenses for conservation items 5% rate increase for conservation expenses in addition to GRC Rates will impact large users more than average users Accelerated timeline; interim phased decision Rebates for water saving devices available and encouraged Allocations established for all customers except Ralph Lane and Chualar due to water supply situation

18 Public Participation California Public Utilities Commission Public Advisor’s Office 505 Van Ness Avenue San Francisco, California (toll-free) (415) Case Numbers: A ; A CPUC Public Participation Hearings May 28 – Chualar Elementary School, 7pm Lincoln Street, Chualar May 29 – Monterey City Council Chambers, 2 pm & 6pm 580 Pacific Street, Monterey