Investing in your water … investing in your future

1. Investing in your water … investing in your future California American Water 2009 - 2011 General Rate & Conservation Case Applications

2. Monterey Water District by the Numbers • Water system established in 1882 • 38,000 connections; 120,000 population including sub-systems (Ryan Ranch, Hidden Hills, Bishop, Ambler Park, Ralph Lane, Chualar & Toro) • 680 miles of water mains • 3,012 fire hydrants • 18 wells along Carmel River; 8 wells in Seaside Basin Aquifer • Two reservoirs, San Clemente & Los Padres • 99 storage tanks, 87AF capacity – plan to add 26AF in 2008 - 2011 • Elevation: 0’ – 1,210’ (0 – 524 psi) • 83 pump stations, 75 pressure regulating stations • 7 satellite well systems • 90 full-time employees, two-thirds Utility Workers of America representation

3. System Usage by Type Golf Course 3% Public Authority 9% Industrial 1% Unaccounted-for-Water 12% Residential 45% Commercial 22% Multi-residential 9%

4. Current Applications • Monterey General Rate Case (GRC) Includes all satellite systems • General Office Rate Case • Conservation Application • Monterey Wastewater GRC • Felton GRC

5. Setting Your Water RatesA 20-month Process GRC Schedule: • Initial proposal filed November 30, 2007 • Final Application filed January 30, 2008 • Public hearings in Monterey May 8 & 9, 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 CPUC

6. GRC Proposed ChangesIncrease in 2009 mainly driven by Capital Investment • Commercial, Industrial and Public Authority customers will receive the same percentage increase

7. Filings for a Sustainable System • Conservation December 14, 2007 • Current GRC + General Office January 30, 2008 For rates in 2009 – 2011 3. Rate of Return May 2008 4. San Clemente Dam Total Cost Recovery Future 5. Next GRC + Support Functions May 2010 For rates in 2012 - 2014 • Coastal Water Project EIR & CPCN On-going review • CWP Total Cost Recovery Future Monterey Customers currently pay for Coastal Water Project preconstruction costs through a surcharge on the bill

8. Major Drivers of Rate Request2009 – 2011 Loss of Consumption 3% Other 4% General Office 7% Labor 8% Capital Investment 62% Seaside Basin & Sand City 16%

9. Capital Investment – 62%2008 – 2011 ($170M Total) Other Improvements: 4% $7M Meet Peak Demand: 8% $13M Protect Environment & Regulatory Compliance: 55% $93M Improve Reliability & Water Quality: 10% $18M * % of total capital Reduce Leaks: 23% $39M Construction costs for Coastal Water Project not included

10. Clerical Position Operations Specialist Systems Operations Specialist Senior Operations Engineer Operations Engineer in Training 4 Maintenance Technicians 4 Utility Workers Valve Turner Backhoe Operator Labor – 8% 15 Additional Employees Proposed Payroll increases & benefits of existing employees

11. General Office & Other – 14% • General Office: 7% • Customer Service Center • Belleville Laboratory • Finance & Legal • External Affairs • Other • Maintenance & Other: 4% • Power • Chemicals • Supplies • Maintenance projects • Loss of Consumption: 3%

12. Regulatory Impacts To Your Water Supply – 16% 10,000 AFY reduction from 2009 limit or replacement supply needed

13. Seaside Adjudication Changed Your Supply • Decision issued March 2006 • 2,500 AF reduction from recent pumping levels required by 2021 • 15% - 20% reduction in overall customer demand or increase in supply needed to meet order • 1% reduction in consumption each year until 2021 • This reduction is for Seaside Adjudication Only

14. 2009 Seaside Basin Fees & Sand City Desal Lease – 16% 2009 Amount Over Ultimate Limit 1,866 AF Replenishment Fee $4,600,000 Other Seaside Basin Fees $800,000 Sand City Desal Plant Lease $800,000 Total Fees $6,200,000

15. 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 • Estimated water savings = 300 AFY or 97M gallons • Accelerated timeline; interim phased decisions

16. State Water Resources Control Board (SWRCB) Draft Cease & Desist Order (DCDO) • Enforces Order 95-10, which limits Carmel River diversions to 3,376 AFY (interim goal of 11,285 AFY) • SWRCB Order 95-10 hearings ’92 – ’95: • Determine waters in valley “underflow” - not groundwater • Allowed continued diversion of water from the Carmel River • Required diligent pursuit of alternative water supplies • Established measures to protect environment while diversions continued • “Plan B” to Coastal Water Project, ASR, Sand City Desal, Recycled Water and REPOG • SWRCB Public Hearing set: • Tuesday April 1, 2008 1:00 p.m. at Monterey Conference Center

17. Proposed Reduction Schedule • Water year = October 1 – September 30 • Interim goal = 11,285 AFY (used as base line)

18. Investing in your water … investing in your future California Public Utilities Commission Public Advisor’s Office 505 Van Ness Avenue San Francisco, California 94102 1-866-849-8390 (toll-free) (415) 703-2074 Email: public.advisor@cpuc.ca.gov Case Number: A.08-01-027 CPUC Public Participation Hearings May 28 – 7pm, Chualar Elementary School May 29 – 2pm & 6pm, Monterey City Hall California American Water Questions?