MARINA — Pure Water Monterey, the highly touted recycled water project, is in default on a water purchase agreement with California American Water after failing to meet a Monday deadline for delivering potable water even as the project’s costs rise amid the delay.
But Cal Am has decided not to exercise its right to terminate the agreement, at least not yet, and continued to express support for the project.
On Tuesday, Cal Am president Rich Svindland sent a letter to Monterey Peninsula Water Management District General Manager Dave Stoldt and Monterey One Water General Manager Paul Sciuto issuing notice that an “event of default” had occurred due to the Pure Water Monterey project’s failure to meet the July 1, 2019 delivery start date under the agreement. The delivery start date is defined as the date when advanced treated recycled water produced by the project commences to any of the metered points of delivery identified in the agreement, according to the letter.
The agencies backing the project have acknowledged for weeks that the project would miss the July 1 deadline. They now say they expect water to be delivered by September or October with start-up testing already underway at the advanced water treatment plant near the Marina landfill. The project is designed to provide up to 3,500 acre-feet of advanced treated wastewater for injection into the Seaside basin and later extraction and use as part of a new Monterey Peninsula water supply. Combined with Cal Am’s proposed 6.4 million gallon per day desalination plant and other sources, the recycled water supply is expected to help offset the state’s Carmel River pumping cutback order set to take full effect at the end of 2021.
Cal Am’s letter indicated company officials would not move to end the agreement for now, though it did note that it is not waiving its right to terminate the agreement at any point in the future. Cal Am also requested the agencies backing the project provide a written response “detailing the plan and proposed timing to achieve the delivery date” and promised to continue monitoring the project.
At the same time, Cal Am’s letter noted the project’s importance in the overall water supply project.
“While it is disappointing that the public agencies were not able to meet their contractual obligations, the project remains an essential component of the Monterey Peninsula Water Supply Project’s water supply portfolio,” the letter reads. “The 3,500 acre-feet of (advanced water treatment) water that is to be provided by the project offers many benefits to Cal Am’s customers, including diversification of water supply sources and more efficient use of our limited resources.”
Cal Am customers will be expected to pay about two-thirds of the overall Pure Water Monterey project cost, which has now risen to an estimated $124 million from a previous estimate of $113 million — a 10-percent increase — as well as ongoing operations and maintenance costs that once finalized could drive the recycled per acre-foot cost from an initial estimate of about $1,720 to as much as $2,100 – which would represent an increase of more than 20 percent.
Neither Stoldt nor Sciuto offered comment on Cal Am’s letter and said they would be presenting the issue to agency officials and representatives, and discussing it with legal counsel, as part of reviewing and discussing the implications.
With regard to the project delay and cost increase, they noted those were originally set in 2016 and the construction schedule has since been affected by weather, timing of material deliveries, construction conditions, and contractor performance, among other variables. Earlier cost estimates, they noted, were made before final design and bids were received. They pointed out that cost increases on large construction projects are “fairly common.” They also pointed out that the project has been awarded more than $21 million in grants since the original cost estimate, helping to offset the increase in costs.
Both also noted that the Pure Water Monterey project delays and cost increases are dwarfed by those experienced by the Cal Am desal project, which they argued has already been delayed at least 3-4 years and seen the plant project cost balloon from about $223.5 million to $279 million.
In addition, the projected per acre-foot cost of desal alone would be about $6,100, according to recent calculations, though the overall water supply cost would fall to about $4,600 per acre-foot with the addition of the recycled water component.
Sciuto said Pure Water Monterey project construction is currently about 93 percent complete, and completion of all punch list items would likely continue for a few months even after the delivery start date this fall.
He said a proposed Pure Water Monterey expansion project under environmental review and aimed at providing another 2,250 acre-feet of advanced treated water wouldn’t be affected by the main project’s delay and cost overruns. He added the project could still be in place by the end of 2021, ahead of the Carmel River cutback order deadline.
The expansion project has been designated by the public agencies as a primary backup in case Cal Am’s desal project is further delayed, though others have argued it should replace desal.
Cal Am spokeswoman Catherine Stedman said the expansion proposal remains an “important backup option,” adding that it’s important people be “realistic about the complexity and time involved in developing these water supply projects” and that desal should remain the community’s focus.
