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HomeMy WebLinkAbout Agenda Packet - February 23, 2009 - UBAZUSA LIGHT ['HATER AGENDA REGULAR MEETING OF AZUSA UTILITY BOARD/AZUSA CITY COUNCIL JSA LIGHT & WATER FEBRUARY 23, 2009 N. AZUSA AVENUE 6:30 P.M. JSA. CA 91702 AZUSA UTILITY BOARD ANGEL A. CARRILLO CHAIRPERSON L E. MACIAS JOSEPH R. ROCHA CHAIRPERSON BOARD MEMBER 3ANKS ROBERT GONZALES MEMBER BOARD MEMBER P.M. Convene to Regular Meeting of the Azusa Utility Board and Azusa City Council • Call to Order • Pledge to the Flag • Roll, Call PUBLIC PARTICIPATION (Person/Group shall be allowed to speak without interruption up to five (5) minutes maximum time, subject to compliance with applicable meeting rules. Questions to the speaker or responses to the speaker's questions or comments shall be handled after the speaker has completed his/her comments. Public Participation will be limited to sixty (60) minutes time.) 001 B. CONSENT CALENDAR The Consent Calendar adopting the printed recommended action will be enacted with one vote. If Staff or Councilmembers wish to address any item on the Consent Calendar individually, it will be considered under SPECIAL CALL ITEMS. 0Q Minutes. Recommendation: Approve minutes of regular meeting on January 26, 2009 as written. MN -Jan 26-09.pdf Recommendation: Approve the pro -forma WSPP Agreement and addendums with Morgan Stanley Capital Group and authorize the Mayor to execute agreement. Morgan Stanley. pdf 3.. Approval of Contract for Proiect LD2008-3, Refurbishment of Azusa Substation Chain Link Fence. Recommendation: Award contract for famishing, installing, and refurbishing the existing chain link fence at Azusa Substation to Pacific Industrial Electric in amount not -to -exceed $126,936. Q 1 St )n Fence.pdf the City of Azusa. Recommendation: (1) Accept Notice of Completion for Project W-245 from Miramontes Construction Company, Incorporated, direct City Clerk to execute NOC and have same recorded at the Office of the Los Angeles County Recorder; and (2) authorize withholding of $3,800 in liquidated damages from retainage amount and final payment to Contractor. NOC-Mirannntes.pdf NOC-W245. pdf 5. Acceptance of Notice of Completion: Project W-245 A&B, Water Main Replacement Project in Sunset Avenue in Azusa and Vincent Avenue in West Covina. Recommendation: Accept Notice of Completion for Project W-245 A&B from John T. Malloy Incorporated, and direct City Clerk to execute NOC and have same recorded at the Office of the Los Angeles County Recorder. NOC Malby. pdf NOC-W245A&B.pdf 002 Acceptance of Notice of Completion: Project W-238, Water Main Replacement Project Group 2: Cypress and Sunset Streets in West Covina. Recommendation: 1) Accept Notice of Completion for Project W-238 from J DeSigio Construction, Incorporated; direct City Clerk to execute NOC and have same recorded at the Office of the Los Angeles County Recorder; and 2) authorize withholding of $43,000 in liquidated damages from retainage amount and final payment to Contractor. lfm� EW •— W, %. 1401 NOC-DeSigio.pdf NOC-W238. pdf Civftec-Itr. pdf Acceptance of Easement from WC Homes, LLC for Water Mains and Services at Tract 62346 in West Covina. Recommendation: Approve the following resolution and authorize City Clerk to file easement with Office of the Los Angeles County Recorder: A RESOLUTION OF THE AZUSA UTILITY BOARD/CITY COUNCIL OF THE CITY OF AZUSA ACCEPTING A CERTAIN GRANT OF EASEMENT AND DIRECTING THE RECORING THEREOF. Easerrent-Cookpdf Reso-DonCookpdf Ur -Don Cook pdf Additional Compensation to Wren & Associates, Incorporated for Inspection Services of Project W-245, Water Main Replacement in First Street Et. Al. in Azusa. Recommendation: Approve addition of $3,800 to Wren and Associates, Incorporated contract for inspection services of Project W- 245. Wren_Amendrmt. pd f Additional Compensation to SA Associates for Inspection Services of Project WVF-243, Water Treatment Plant Water Main and Sewer Force Main Installation. Recommendation: Approve the addition of $5,900 to SA Associates contract for inspection services of Project W VF -243. SA-WVP243.pdf 0. Approval to Seek Bids for Proiect WV -262 - Water Main Replacement in Rowland Avenue in West Covina. Recommendation: Approve the advertisement for and solicitation of bids for Project WV -262. M It Mr-Main-Bid-WV262 .pdf 003 Il. Additional Compensation to SSC Construction, Incorporated for Project WVF-207, Canvon Filtration Plant Membrane Treatment Upgrade and Expansion. Recommendation: Approve Change Order No. 14 for additional compensation of $93,005.85 to SSC Construction Incorporated contract for construction of Project W VF -207. f,;,-, SSC-WTPC0-14.pdf SSC-C014.pdf 12. Approval of Water Supply Agreement with Miller Coors LLC. Recommendation: Approve amended and restated water supply agreement with Miller Coors LLC. EMN L ISI Rpt-Mdl oors-Agrrt Agreement.pdf .pdf C. SCHEDULED ITEM Approval of Budget Amendment for Canyon Filtration Plant Proiect for Obtaining an Operating Permit for Emergency Generator. Recommendation: Approve the following resolution: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA, CALIFORNIA, AMENDING THE FISCAL YEAR 2008-2009 CAPITAL IMPROVEMENT PROGRAM BUDGET FOR THE WATER UTILITY TO AUTHORIZE APPROPRIATIONS NECESSARY TO OBTAIN PERMIT FROM SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT TO OPERATE A DIESEL POWERED BACKUP GENERATOR AT WATER TREATMENT PLANT. LL—J L4 u Budget_Andnt_ERC Reso_Budget - AQMD Ltr. pdf .pdf Andnt.pdf D. STAFF REPORTS/COMMUNICATIONS Monthly Update on Water Treatment Plant WTP Molf Update.pdf [1111111 Delta Vision Committee Implementation Report DeltaVslonReport.pd f KW 141 Exhibd-DeltaYsionRp t. pdf Legislative Update DIRECTOR'S COMMENTS Adjournment. compliance with the Americans with Disabilities Act, if you need special assistance to participate in a city ting, please contact the City Clerk at 626-812-5229. Notification three (3) working days prior to the ting or time when special services are needed will assist staff in assuring that reasonable arrangements be made to provide access to the meeting. " compliance with Government Code Section 54957.5, agenda materials are available for inspection by tbers of the public at the following locations. Azusa City Clerk's Office - 213 E. Foothill Boulevard, sa City Library - 729 N. Dalton Avenue, and Azusa Light & Water -729 N. Azusa Avenue, Azusa CA. " 005 W LegislatIve.pdf CMUA RPS SMUT-LowCarbon.pd Ltr to Gov and Prindples.pdf f Obane on Water Cris DIRECTOR'S COMMENTS Adjournment. compliance with the Americans with Disabilities Act, if you need special assistance to participate in a city ting, please contact the City Clerk at 626-812-5229. Notification three (3) working days prior to the ting or time when special services are needed will assist staff in assuring that reasonable arrangements be made to provide access to the meeting. " compliance with Government Code Section 54957.5, agenda materials are available for inspection by tbers of the public at the following locations. Azusa City Clerk's Office - 213 E. Foothill Boulevard, sa City Library - 729 N. Dalton Avenue, and Azusa Light & Water -729 N. Azusa Avenue, Azusa CA. " 005 4 AZUSA ❑GH7 4 RAI![ CITY OF AZUSA MINUTES OF THE REGULAR MEETING OF THE AZUSA UTILITY BOARD/CITY COUNCIL MONDAY, JANUARY 26, 2009 — 6:30 P.M. The Utility Board/City Council of the City of Azusa met in regular session, at the above date and time, at the Azusa Light and Water Conference Room, located at 729 N. Azusa Avenue, Azusa, California. Chairman Carrillo called the meeting to order. Call to Order ROLL CALL Roll Call PRESENT: BOARD MEMBERS: GONZALES, CARRILLO, MACIAS, HANKS, ROCHA ABSENT: BOARD MEMBERS: NONE Also Present ALSO PRESENT: City Attorney Ferre, City Manager Delach, Assistant City Manager Makshanoff, Director of Utilities Hsu, Director of Resource Management Tang, Assistant to the Utilities Director Kalscheuer, Assistant Director of Water Operations Anderson, Electrical Engineer Langit, Assistant Director Electrical Operations Ramirez, Controller Michaels -Aguilar, Director of Recreation and Family Services Jacobs, Business Developme6t/Public Benefits Coordinator Reid, Assistant Director Customer Care and Solutions Vanca, Azusa Police Lieutenant Momot, City Clerk Mendoza, Deputy City Clerk Toscano. Public Participation Pub Part Ms. Suzanne Avila addressed the Board Members providing information regarding the State funding for her S. Avila business entity, California Resource Connections, stating that due to the State Budget crisis all funding is on CRC hold. She also advised that the California Conservation Corps is only being funded at local levels. Comments Mr. Jorge Rosales addressed the Board Members with three items of concern: (1) He asked that the City do J. Rosales something to keep the Catwalk at Haltem/Viceroy safe, preferably with gating and lighting. (2) He praised Comments the work done by Director of Resource Management Tang with regard to the Garnet Wind Energy Hedging Transaction Report. (3) He asked that item regarding Additional Compensation to J. DeSigio Construction for Project W-238, gets more discussion for clarification. Mr. Mark Ramirez presented a letter to Board Members regarding conditions at Rosedale Rancho Parks and M. Ramirez requests he would like considered. (Item was discussed later in the meeting). Comments Ms. Evelia Arriaz8 addressed the Board Members detailing the issues surrounding her business located at 609- E. Arriaza 611 N. Azusa Avenue; the item was referred to staff and City Manager will provide information to Board. Comments MW Mr. Raul Arsenas addressed the Board Members detailing his concern regarding the illegal activities occurring R. Arsenas at the Catwalk at Haltern/Viceroy such as people doing drug and paraphernalia throughout the walk. Comments The CONSENT CALENDAR consisting of Items B -I through B-15, was approved by motion of Board Consent Cal Member Hanks, seconded by Board Member Rocha and unanimously carried with the exception of items Appvd B-4, 6, B-4, B-6, B-12 and B-15, which were considered under the Special Call portion of the Agenda. 12, 15 Spec 1. The minutes of the regular meeting of November 24, 2008, were approved as written. Min appvd 2. Approval was given to pro -forma Edison Electric Institute (EEI) Agreement with Shell Energy North EEI Agmt America and the Mayor was authorized to execute agreement. w/Shell 3. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA, CALIFORNIA, Res. 09-C7 AUTHORIZING THE PROCUREMENT OF MULTI-YEAR SUMMER ELECTRIC PEAKING Smr Elec Pwr POWER. 4. SPECIAL CALL ITEM. Spec Call 5. The proposal of HDR Engineering for water rate study in amount not -to -exceed $31,767, was approved HDR Eng and the City Manager was authorized to execute Professional Services Agreement. , Wtr Rate Study 6. SPECIAL CALL ITEM. Spec Call 7. The California Resource Connections (CRC) proposal to fund backyard composting program, and river CRC Proposal litter cleanup event during April Clean and Green month for a total amount of $11,300, was approved. Approved 8. A RESOLUTION OF THE AZUSA UTILITY BOARD/CITY COUNCIL OF THE CITY OF AZUSA, Res. 09-C9 CALIFORNIA, APPROVING PARTICIPATION IN USED OIL AND HHW GRANTS Appvg HHW ADMINISTERED BY THE CALIFORNIA INTEGRATED WASTE MANAGEMENT BOARD. Grants 9. Approval was given to reject the sole bid received for Project LD2008-3, Refurbish Existing Chain Link Refurbish Fnce Fence at Azusa Substation; and to authorize staff to solicit informal bids. Substation 10. The award of contract to Southwest Graphic Services for artwork and printing of Utility informational Southwest materials for 18 months with an optional two-year extension at a cost not -to -exceed $16,000 for FY 08- Info materials 09, was approved. 11. Project W-243 was accepted as complete and the City Clerk's Office was directed to execute Notice of NOC Project Completion and have same recorded at the Los Angeles County Recorder. W-243 12. SPECIAL CALL ITEM. Spec Call 13. Change Order No. 13 in amount of $71,407.91 and extension of 34 days to the SSC Construction Change Order Incorporated contract for Project W VF -207, Canyon Filtration Plant Membrane Treatment Upgrade and SSC Construct. Expansion, were approved. 14. Approval was given for purchase of single drum puller in amount not -to -exceed $63,287.46 from Purchase drum Sherman & Reilly Incorporated and the purchase of bullwheel tensioner in amount not -to -exceed puller& $34,804.38 from Wagner Smith Equipment Company. bullwheel 15. SPECIAL CALL ITEM. Spec Call 01/26/09 PAGE TWO 007 SPECIAL CALL ITEMS Special Call Board Member Hanks expressed concern and discussion was held regarding the Legislative Principles Hanks regarding renewable energy recommended and asked that staff make sure that these principles remain goals Comments and become State mandates. He noted not specific changes to the item. Moved by Board Member Rocha, Adoption of seconded by Board Member Gonzales and unanimously carried to adopt principles regarding Renewable RPS Principles Portfolio Standards (RPS) and authorize staff to advocate for or against legislation based on principles. Board Member Rocha asked that the Fuel Cost Adjustment for Refuse Services be presented verbally as Rocha information. item at the meeting of February 2, 2009, perhaps as part of City Manager's report. Moved by Comments Board Member Rocha, seconded by Board Member Gonzales and unanimously carried to approve the FCA Refuse Amendment with Athens Services for Fuel Cost Adjustment by adopting the following Resolution: approved A RESOLUTION OF THE UTILITY BOARD/CITY COUNCIL OF THE CITY OF AZUSA, APPROVING Res. 09-C8 THE TWELFTH AMENDMENT TO THE EXCLUSIVE FRANCHISE AGREEMENT WITH ARAKELIAN Amendment ENTERPRISES TO AMEND THE SERVICE RATES AND FEES FOR THE PERIOD OF JANUARY I, to Agmt w/ 2009 THROUGH JUNE 30, 2009. Arakelian Board Member Hanks addressed RFP for Water Main Replacement Projects and asked if they have looked into Hanks the possibility of using inversion lining and Assistant Director of Water Operations Anderson responded Comments stating that cement lining is the best form and other options would be too expensive. Moved by Board RFP Water Member Rocha, seconded by Board Member Gonzales and unanimously carried to authorize staff to solicit Main Replace proposals from qualified consultants to prepare plans and specifications for water main replacement projects. Approved In regard to Project W-238 Water Main Replacement Project, Board Member Rocha asked about the status of Rocha the liquidated damages and the request by the contractor for additional compensation for claimed extra work. Comments Director of Utilities Hsu provided information regarding the delays in project completion and the contractors claim for extra work. Director Hsu stated that the budget addition and contract extension that were being recommended for approval were valid but that other such requests from the contractor had not been accepted. City Attorney Ferre also responded by stating that the City would be moving forward with the applicable requirements for imposing liquidated damages and otherwise closing out the project in accordance with the provisions of the contract and the law. Moved by Board Member Rocha, seconded by Board Member Gonzales and unanimously carried to approve a Budget Add budget addition of $77,508.81 and extension of 13 days to the DeSigio Incorporated contract for construction DeSigio Inc. of Project W-238, Water Main Replacement Project; and authorize staff to negotiate with Contractor, where appropriate, regarding extra cost claims and liquidated damages and to otherwise close out the project in accordance with the provisions of the contract and the law. Board Member Rocha addressed item B-7, requesting that a letter be drafted to Kim and Steven from Save Our Rocha Beach in order to inform this that they can be a part of the April Clean and Green Month activities. Comments STAFF REPORTS Staff Rpts Director of Utilities Hsu presented a legal opinion on the permissible use of Electric Utility's Public Benefit Pub Benefit Charge (PBC) money. He stated the information was request by a resident and has been a question that has Charge info arose from the public recently; it is an informational item. Director of Utilities Hsu presented the Monthly Update on Water Treatment Plant stating that the project is Monthly WTP 92.62% complete; it's still in final phase i.e. touch up and finishing of work; there have been delays and slow Update as the contractor doesn't have a lot of manpower; $1,000 per calendar day liquidated damages are being applied and staff has the 10% retainage. Assistant Director of Water Operation Anderson responded to questions regarding the operation stating that it is not operable yet. City Attorney Ferre responded stating that there are legal tools that can be used to move the project forward. Discussion was held among Board Members regarding options available. 01/26/09 PAGE THREE :W Director of Utilities Hsu presented an update on the Greenpath North Transmission Project stating that in 2006 Greenpath staff participated in the development studies of the project which consists of a high-voltage transmission line North Trans from the Imperial Valley to Greater Los Angeles with the purpose of transmitting renewable resources located in Imperial Valley. He stated that engineering and technical studies have been done and potential transmission line routes have been identified for future analysis, but it is still in the beginning stages. He responded to questions posed stating that other participants consist of Los Angeles Department of Water and Power, cities of Banning, Burbank, Glendale, and Pasadena and this would account for 15% of Azusa needs of renewable energy. Director of Utilities Hsu presented the Garnet Wind Energy Hedging Transaction Report stating that due to the Gamet W ind favorable energy market conditions staff engaged in a hedging transaction on December 24, 2008; the report Energy provided the following guidelines Transaction Counterparty, Authorized Staff, Transaction Duration, Hedging Rpt Allowable Transactions Volumes, Trigger Prices, and Frequency of Trigger. Director of Utilities Hsu presented the San Gabriel Valley (SGV) Tribune Article on La Nina, and Snow Packs Newspaper Affecting Water Supply which state the drought conditions and Southern California would have a dry winter Articles season; he detailed the articles. He stated that he would provide a report regarding the Bay Delta water. Water Director of Utilities announced that the Grand Opening of Fresh and Easy will be on February 11, 2009 and Anncmts Light and Water will be supplying reusable grocery bags at the event. American Public Power Authority will APPA be having a Winter Meeting in Washington D.C. from February 22-26, 2009. APPA Annual Conference will Conferences be in Salt Lake City from June 13-17, 2009, and CMUA will have it's Annual Conference in Palm Springs CMUA from March 25-27, 2009. DIRECTOR'S COMMENTS Dir Cmts Ms. Carmen Holten addressed the Board Members detailing the nuisance at the Catwalk at Haltem/Viceroy Catwalk at stating that illegal activities are going on there, it is dirty, it is used for graffiti, etc. She requested that the area Haltem & be gated. Discussion was held regarding the, issue and possible solutions to the problem. Staff was requested Viceroy . to come back with options and the police department was asked to do increased patrols in the meantime. Light and Water was directed to check on the lighting in that area. Discussion was held between Board Members and Staff regarding the request from residents in the area of Discussion Rosedale to change Rancho Park from a City Park to a Neighborhood Park; post hours dawn to dusk; install Rancho Park resident parking only signs on Griffith Street; install not a through street signs at the comer of Crape Myrtle Drive and Griffith Street, and install no parking signs on MacNeil Drive. Staff was directed to look into the hours posted vs. closure of restroom time; signage; and other solutions to the problems discussed. Director of Utilities Hsu displayed a Sharps container to dispose of home generated sharps such as syringes, Sharps from diabetics, etc. The containers can be obtained from the Senior Center, Foothill Medical Pharmacy and Program Azusa Medical Pharmacy for free and after filled can be taken back to pharmacy to be shipped to place for disposal. Moved by Board Member Gonzales, seconded by Chairman Carrillo and unanimously carried to adjourn. Adjourn TIME OF ADJOURNMENT: SECRETARY NEXT RESOLUTION NO. 09 -CIO. 01/26/09 PAGE FOUR Me 8- q h , pp�aaavvvaat.y�y AZUSA •. CMI i %tiFl CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES,, DATE: FEBRUARY 23, 2009 SUBJECT: APPROVAL OF PRO -FORMA WESTERN SYSTEMS POWER POOL (WSPP) AGREEMENT AND ADDENDUM WITH MORGAN STANLEY CAPITAL GROUP RECOMMENDATION It is recommended that the Utility Board/City Council approve the pro -forma WSPP agreement and addendums with Morgan Stanley Capital Group ("Morgan Stanley") and authorize the Mayor to execute the agreement upon the preparation of execution copies. BACKGROUND The City has entered into pro -forma enabling agreements in the past several years for the purchase and sale of wholesale electricity. Due to the current financial crisis, the market participants are becoming increasingly cognizant of the need to complement/revise certain terms and conditions to the pro -forma enabling agreements. The pro forma WSPP agreement and addendum with Morgan Stanley will provide clarity in financial credit terms for power transactions between Morgan Stanley and the City. Staff has reviewed the proposed agreement and has found terms and conditions acceptable subject to final review of the addendum; therefore staff is hereby recommending the execution of the agreement upon the preparation of execution copies. Due to its size, the pro forma agreement and the addendums to the agreement are available public review at Azusa Light & Water 2"d floor office counter located at 729 N. Azusa Avenue. FISCAL IMPACT This item relates only to the terms of the WSPP agreement which enables but does not require the parties to enter into transactions, so there is no fiscal impact of approving the agreement. Prepared by: Bob Tang, Assistant Director Resource Management 010 &W3 - ZUSA A r.nr a warm CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES DATE: FEBRUARY 23, 2009 p SUBJECT: AWARD CONTRACT TO PACIFIC INDUSTRIAL ELECTRIC FOR REFURBISHING THE EXISTING CHAIN LINK FENCE AT AZUSA SUBSTATION RECOMMENDATION It is recommended that the Utility Board/City Council award the contract to Pacific Industrial Electric in the amount not to exceed $126,936 for furnishing, installing and refurbishing the existing chain link fence at Azusa Substation, as per plans and specifications for Project #LD 2008-3. BACKGROUND During the regular meeting held on January 26, 2009, the Utility Board/City Council rejected a sole bid to refurbish chain link fence at Azusa Substation and make other perimeter improvements pursuant to a bid solicitation in December 2008. Thereafter, Utility Board/City Council authorized staff to solicit informal bids. Two bids were received on February 10, 2009, and the bid amounts inclusive of a ten percent contingency allowance are as follows: 1) Pacific Industrial Electric $126,936 2) GDL Best Quality Painting, Inc. $165,000 Staff reviewed the bid submitted by Pacific Industrial Electric and found it to be responsive and in compliance with the project plans and specifications. FISCAL IMPACT The FY 2008-09 Capital Improvement Project budget includes sufficient funds for this project in account 33-80-000-000-7145/73009C-7145. Prepared by: F. Langit — Senior Engineer Oil B-µ A7USA cnr � werr� CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIE 1t DATE: FEBRUARY 23, 2009 SUBJECT: NOTICE OF COMPLETION -PROJECT W-245, WATER MAIN REPLACEMENT IN FIRST, MCKINLEY, PARAMOUNT, ROOSEVELT AND VIRGINIA STREET, BARBARA DRIVE, AND AN ALLEY WEST OF BARBARA DRIVE ALL IN THE CITY OF AZUSA. RECOMMENDATION It is recommended that the Utility Board/City Council: (1) accept Project W-245, and direct the City Clerk's Office to execute the Notice of Completion and have the Notice recorded at the Office of the Los Angeles County Recorder; and (2) authorize withholding of $3,800 in nCu�a�gr�-from retainage amount and final payment to Contractor. �J BACKGROUND At its March 24, 2008 regular meeting, the Azusa Utility Board/ City Council accepted the bid of Miramontes Construction Co., Inc. to construct Project W-245, Water Main Replacement in First, Mckinley, Paramount, Roosevelt And Virginia Street, Barbara Drive, and an Alley West of Barbara Drive all in the City of Azusa. The original project contract completion date was July 11, 2008. With time extensions, the project completion date was September 30. Miramontes completed the project on October 30, 2008, 30 calendar days past the contract time of completion. This 30 day delay resulted in $3,800 of additional inspection time which should be withheld as liquidated damages. The City currently holds $43,570.15 in retainage from which $3,800.00 dollars will be deducted for additional inspection time and $39,770.15 returned to Miramontes Construction Co. following the statutory waiting period. FISCAL IMPACT The fiscal impact of accepting Project W-245 for Notice of Completion involves the return of $39,7.70.15 currently held by the City as retainage on this project following the statutory 35 day waiting period. Prepared by: Chet F. Anderson, P.E., Assistant Director, Water Operations 012 RECORDING REQUESTED BY City of Azusa AND WHEN RECORDED MAIL TO: NAME Azusa City Clerk STREET ADDRESS 213 E. Foothill Blvd. CITY, STATES Azusa, CA 91702 ZIP CODE NOTICE OF COMPLETION Notice pursuant to Civil Code Section 3093, must be filed within 10 days after completion. (See reverse side for Complete requirements.) Notice is hereby given that: I. The undersigned is owner or corporate officer of the owner of the interest or estate stated below in the property hereinafter described: 2. The full name of the owner is The City of Azusa 3. The full address of the owner is 213 E. Foothill Blvd., Azusa. CA 91702 4. The nature of the interest or estate of the owner is: In fee. (IF OT@R THAN FEE.SDUKE M ME AND NSERT, MR ERAMFSE, PURCHASES UNDER COM7MM OF MROBASE, OR LESSEE) 5. The full names and full addresses of all persons, if any, who hold title with the undersigned as joint tenants or as tenants in common are: NAMES ADDRESSES 6. The full names and full addresses of the predecessors in interest of the undersigned, if the property was transferred subsequent to the commencement of the work or improvements herein referred to: NAMES ADDRESSES 7. A work of improvement on the property hereinafter described was completed on February 23, 2009 The work done was: Water Main Replacement: Firs[ Mc Yinley, Paramount Roosevelt & Virginia Streets. 6. The name of the contractor, if any, for such work of improvement was Miramontes Construction Co. Inc. May 14, 008 IIF NO CONTRACTOR FOR WORK OF IMPROVEMENT AS A WHOLE. MSERTNONE) IRATE OFCOMRACT) 9. The property on which said work of improvement was completed is in the City of Azusa, County of Los Angeles, and State of CA; and is described as follows: Water Main replacement on First Mc Kinley, Paramount Roosevelt & Virginia Streets. 10. The street address of said property is First. Mc Kinley, Paramount. Roosevelt & Virginian Streets. Dated: Joseph R. Rocha, Mayor (SIGNATURE OF OW F.R OR CORPORATE OFFICER OF OWNER NAMED M PARAGRAM1I OR 1115 AGENT) VERIFICATION I, the undersigned, say: 1 am the person who signed the foregoing notice. I have read said notice of completion and know its contents, and the facts stated therein are true of my own knowledge. I declare under penalty of peTjury that the foregoing is true and correct. Executed at Azusa, California, this day of February, 2009. Joseph R. Rocha, (SIGNATURE) 013 CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES , DATE: FEBRUARY 23, 2009 < a� SUBJECT: NOTICE OF COMPLETION - PROJECT W-245 A&B, WATER MAIN REPLACEMENT IN SUNSET AVENUE IN THE CITY OF AZUSA AND VINCENT AVENUE IN THE CITY OF WEST COVINA RECOMMENDATION It is recommended that the Utility Board/City Council accept Project W-245 A&B, and direct the City Clerk's Office to execute the Notice of Completion and have the same recorded at the Office of the Los Angeles County Recorder. BACKGROUND The Water Division designed these water main replacements to replace water mains that were experiencing problems with leaks and flow problems due to the age of the mains. The mains replaced in this project had leak problems requiring constant repair and excessive manhours spent making the repairs. Also, the main replaced in Sunset Avenue are in a street designated by Azusa Public Works as streets to be resurfaced this year, and the Vincent Avenue project allows the Water Division to lessen the probability of leaks within the newly paved streets in West Covina. The contract award for this project was made by the Utility Board July 28, 2008 to John T. Malloy, Inc. FISCAL IMPACT The fiscal impact of approving Notice of Completion involves the return of $21,972.50 currently held by the City as retainage on this project following the statutory 35 day waiting period. Prepared by: Chet F. Anderson, P.E., Assistant Director, Water Operations 014 RECORDING REQUESTED BY City of Azusa AND WHEN RECORDED MAIL TO: NAME Azusa City Clerk STREET ADDRESS 213 E. Foothill Blvd. QTY. STATE s Azusa, CA 91702 ZIP CODE NOTICE OF COMPLETION Notice pursuant to Civil Code Section 3093, must be filed within 10 days after completion. (See reverse side for Complete requirements.) Notice is hereby given that: I. The undersigned is owner or corporate officer of the owner of the interest or estate stated below in the property hereinafter described: 2. The full name of the owner is The City of Azusa 3. The full address of the owner is 213 E. Foothill Blvd.. Azusa. CA 91702 4. The nature of the interest or estate of the owner is: In fee HE OTHER MAN FEE, STNKE IN FEE AND INSERT, FOR E% MPLE, PURCHASER UNDER CONTRACTOF PURCHASL OR LESSEE) 5. The full names and full addresses of all persons, if any, who hold title with the undersigned as joint tenants or as tenants in common are: NAMES ADDRESSES 6. The full names and full addresses of the predecessors in interest of the undersigned, if the property was transferred subsequent to the commencement of the work or improvements herein referred to: NAMES ADDRESSES 7. A work of improvement on the property hereinafter described was completed on February 23 2009 The work done was: Protect 245 A&B. Water main renlacemenl in Sunset Avenue & Vincent Avenue. 8. The name of the contractor, if any, for such work of improvement was John T. Malloy Inc. - 3032 Bandini Blvd., Los Angeles, CA 90023A510 September 2, 2008 HP NO CONTRACTOR FOR WORK OF IMPROVEMENT AS A WHOLE, INSERT NONE.) (DATE OF CONMAM 9. The property on which said work of improvement was completed is in the City of Azusa, County of Los Angeles, and State of CA; and is described as follows: Water Main replacement in Sunset Avenue & Vincent Avenue 10. The street address of said property is Sunset Avenue & Vincent Avenue. Joseph R. Rocha, Mayor Dated: (SIGNATURE OF OWNER OR CORPORATE OFFICER OF OWNER NAMED IN PARAGRAPH 2 O HIS AGEN 1 VERIFICATION 1, the undersigned, say: I am the person who signed the foregoing notice. 1 have read said notice of completion and know its contents, and the facts stated therein are true of my own knowledge. declare under penalty of perjury that the foregoing is true and correct. Executed at Azusa, California, this day of February, 2009. Joseph R. Rocha. (SIGNATURE) 015 USA SA CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES DATE: FEBRUARY 23, 2009 SUBJECT: NOTICE OF COMPLETION -PROJECT W-238 WATER MAIN REPLACEMENT PROJECT—GROUP 2: CYPRESS STREET AND SUNSET AVENUE IN THE CITY OF WEST COVINA RECOMMENDATION It is recommended that the Utility Board/City Council: (1) accept Project W-238, and direct the City Clerk's Office to execute the Notice of Completion and have the Notice recorded at the Office of the Los Angeles County Recorder; and (2) authorize the withholding of $43,000 in liquidated damages from retainage amount and final payment to DeSigio Construction, Inc. BACKGROUND At its April 23, 2007 regular meeting, the Azusa Utility Board/ City Council accepted the bid of J. DeSigio Construction, Inc. to construct Project W-238, Water Main Replacement Project— Group 2: Cypress Street and Sunset Avenue. After approved time extensions, the project contract completion_date was November 27, 2007; the date of substantial completion for this project was February 21, 2008, which represents 86 days past the completion date or $43,000 in liquidated damages. DeSigio continued to work until March 21, 2008, at which time the project was deemed fully complete. The Water Division has been in discussions with DeSigio since the end of construction to move the project completion to the point where the Utility Board can approve the Notice of Completion for the project and record the Final Notice. Recording the Final Notice will allow the Water Division to refund the retainage on the project 35 days after the recording date. The City currently holds $165,515.08 in retainage which represents 10% of the total contract amount. By statute only 5% of the contract amount needs to be held for the 35 day waiting period. Following approval of the filing of the Notice of Completion; 50% of the retainage held, or $82,757.54, will be refunded immediately to DeSigio, and the remaining $82,757.54 will be held for the statutory 35 day period. 016 DeSigio has claimed that they are owed additional compensation of $178,630.29. Those claims have been rejected by both the City and Civiltec Engineering, Inc., the construction inspector on the project. DeSigio's claims are undocumented and were filed without notice of changed condition given by the contractor during construction; the claims were filed without City or Engineer approval of a change during construction; there were no changes in construction requirements which were protested by the contractor, written or otherwise, during construction and as being untimely or having an impact on project schedule. DeSigio has implied that they will take legal action if liquidated damages are withheld. However, staff have not received any information that would compel a change in the City's position to impose liquidated damages in the amount of $43,000 as outlined in the attached letter. Therefore, staff recommends that the Notice of Completion for the project be approved and that the liquidated damages be withheld in the amount of $43,000 from final retainage payment. FISCAL IMPACT The fiscal impact of approving Notice of Completion involves the return of $82,757.54 initially. Then, after the statutory 35 -day waiting period, the remaining retainage amount will be released, $39,757.54 ($82,757.54 less liquidated damages of $43,000). Total fiscal impact will be $122,515.08 ($82,757.54 + $39,757.54). Prepared by: Chet F. Anderson, P.E., Assistant Director, Water Operations 017 General Civil, Municipal, Water and Wastewater Engineering, Planning, Construction Management and Surveying Monrovia Prescott Phoenix February 11, 2009 J. De Sigio Construction, Inc. 935 So. Mayflower Avenue Arcadia, CA 91006 Attention: Julian De Sigio III Subject: Azusa Light and Water, Water Main Replacement Project Group 2, Cypress Street and Sunset Avenue, Project No. W-238 Dear Mr. De Sigio Azusa Light and Water (ALW) and CiviJtec engineering inc. (Civiitec) have reviewed your letters dated January 20, 2009 and January 27, 2009 regarding the subject project. ALW and Civiitechave also conferred and agree on the positions established herein regarding contract change orders, liquidated damages and the contract status. ALW has approved Contract Change Orders (CCOs)1 through 6 and will be issuing final payment on those CCOs soon, if it has not already occurred. ALW is also pursuing contract closure procedures in the next Utility Board Meeting that will lead to filing allotice of Completion. ALW has documented liquidated damages on the project. The Notice to Proceed was issued to JDC per a letter dated June 4, 2007. Per this letter, the Effective Start Date for the project was June 11, 2007. JDC began mobilizing to the Project on July 6, 2007. By the terms of the contract, the contract time of completion is 150 calendar days. The Completion Date for this project was therefore November 7, 2007. Twenty (20) additional days were added to the Contract time frame per contact change order totaling 170 calendar days making the contract end date November 27, 2007. The PRV Station was started up on February 21, 2008. At this point in time, the water system was completely active and is the date of substantial completion per ALW's protocol (several of De Sigio's previous letters indicate February 14a' as the substantial completion date, therefore there are only 7 days difference in our positions). De Sigio is 86 calendar days past the approved time frame of 170 days. De Sigio continued to work on contract items and the punch list items until March 21, 2008. This adds another 30 days of time to the project where your time was not efficient. ALW continued to pay for inspection services up to and past this date to ensure your work was compliant with the Contract requirements and local jurisdictions. Based upon February 21, 2008 as the substantial completion date and the resulting 86 calendar days at $500 per day, ALW will charge De Sigio $43,000.00 of liquidated damages pursuant to Section 5.06 of the General Conditions. As part of the contract closing procedures, ALW will withhold this amount from the final retention payment. 118 West Lime Avenue Monrovia, CA 91016 TEL: (626) 357-0588 FAX: (626) 303-7957 un J. De Sigio Construction, Inc. Julian De Sigio III Water Main Replacement Project Group 2, Cypress Street and Sunset Avenue, Project No. W-238 February 11, 2009 Page 2 rdhVV/ Q11VITITFIC engineering inc For Qvalifyo/life De Sigio established a pattern and procedure for processing claims for changed conditions in the field early on in the project. Within a matter of days, field documents were submitted to ALW10villec for approval and processing. With this process, the original six CCOs were made known in atimely manner and eventually approved. It wasn't until May 7, 2008 that additional claims were made (listed as JDC's Extra Work Requests) which is approximately three (3) months after the substantial completion date and in some cases 10 months after the date of the claimed work performed. This type of request falls outside JDC's pattern and can only be considered project accounting after completion of the work to offset perceived losses. Section 3.04 C. of the General Conditions states If the original bid prices are not applicable, the adjustment in Contract price shall be based on a lump sum or unit price agreed upon by the City and the Contractor prior to executing the change order". ALW was not given a chance to review any claim for a potential changed conditions when the work occurred in JDC's Extra Work Requests 001 through 046. Therefore, ALW has no choice but to deny JDC's requests totaling $178,630.29 on this basis. JDC denied ALW the process outlined in the Standard Specifications for Public Works Construction (SSPWC) Section 3-4 Changed Conditions. Per Special Provisions Section 7.05, the work shall be in accordance with the SSPWC. Section 3-4 outlines a procedure De Sigio complied with on the approved six CCOs and ignored on any other perceived changed condition. The "Engineer" referred to in the SSPWC Section is identified in Section 7.02 of the Special Provisions. The "Engineer", W. David Byrum, was not "promptly" notified of JDC's Extra Work Requests 001 through 046. As a matter of record, the notification carne on May 7, 2008, well after the close of all construction on the project. This is an unreasonable time frame for presentation of a claim Furthermore, any documentation of any work performed per the daily inspection reports does not constitute notification by the Contractor to the Engineer. Daily and weekly reporting by the inspector is a communication mechanism between the field and the Engineer and not between the Contractor and the Engineer. Therefore, ALW has no choice but to deny JDC's requests totaling $178,630.29 on this basis. JDC also implies it has "Extended Home Office Overhead" in the amount of $81,252.00 per the May 7, 2008 Final Tabulation and per the January 27, 2009 letter. No documentation other that these one line statements made has been supplied. Therefore, any claim for extended home office overhead is denied. ALW is proceeding to close the project on this basis. Please contact me directly with any questions. Sincerely, CIVILTEC engineering, ina W. David Bynum, P.E. Principal Engineer X=00 5WII CMA 0y .SmeflL UmVpC Rcspometo Clmmd. 019 1 RECORDING REQUESTED BY City of Azusa AND WHEN RECORDED MAIL To: NAME Azusa City Clerk STREET ADDRESS 213 E. Foothill Blvd. CCTV, STATE& Azusa, CA 91702 ZIP CODE NOTICE OF COMPLETION Notice pursuant to Civil Code Section 3093, must be filed within 10 days after completion. (See reverse side for Complete requirements.) Notice is hereby given that: I. The undersigned is owner or corporate officer of the owner of the interest or estate stated below in the property hereinafter described: 2. The full name of the owner is The Citv of Azusa 3. The full address of the owner is 213 E. Foothill Blvd.. Azusa. CA 91702 4. The nature of the interest or estate of the owner is: In fee IIF OTHER THAN FEE. STRIKE M ME! AND INSERT. FOR EIUMPIE.PORCHASER UNDER CONFRAR OF PURCHASE. OR LESSEE) 5. The full names and full addresses of all persons, if any, who hold title with the undersigned as joint tenants or as tenants in common are: NAMES 471)9Lx.XY�9 6. The full names and full addresses of the predecessors in interest of the undersigned, if the property was transferred subsequent to the commencement of the work or improvements herein referred to: ADDRESSES 7. A work of improvement on the property hereinafter described was completed on February 23 2009 The work done was: Water Main Replacement: Cypress & Sunset Streets in West Covina CA 8. The name of the contractor, if any, for such work of improvement was J.Desieio Construction Co. Inc. May 18. 2007 (IF NO CONMAC DR FOR WORK OF IMPROVEMENT AS A WHOIE. MSERT NONE) (DATE OF CONTRACT) 9. The property on which said work of improvement was completed is in the City of Azusa, County of Las Angeles, and State of CA; and is described as follows: Water Main replacement on Cypress & Sunset Streets in West Covina CA 10. The street address of said property is Cypress & Sunset Streets in West Covina CA he=—I Joseph R. Rocha, Mayor (SIGNATURE OFOWNER OR CORPORATE. OFFICER OFOWNER NAMED M PARAGRAPH 2 O HIS ACIENn VERIFICATION 1, the undersigned, say: I am the person who signed the foregoing notice. 1 have read said notice of completion and know its contents, and the facts stated therein are true of my own knowledge. I declare under penalty of perjury that the foregoing is true and correct. Executed at Azusa, California, this day of February, 2009. Joseph R. Rocha, (SIGNATURE) 020 AZ r.in a warrUSA v CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES a° DATE: FEBRUARY 23, 2009 SUBJECT: ACCEPTANCE OF GRANT OF EASEMENT FROM WC HOMES, LLC, FOR WATER MAINS AND SERVICES AT TRACT 62346 IN THE CITY OF WEST COVINA RECOMMENDATION It is recommended that the Utility Board/City Council accept a Grant of Easement by the attached Resolution for the subject location and authorize the City Clerk to file it with the Office of the Los Angeles County Recorder. BACKGROUND A landowner/ developer is required to grant an easement to Azusa Light & Water Department (ALW) for any water facilities to be installed in his or her property. These grants of easements allow ALW the right-of-way for operation & maintenance of such facilities. Attached herewith are the Grant of Easement and its "Exhibit A" and "Exhibit B" for the water facilities in Lot "A" of Tract 62346 located in the City of West Covina. This easement was secured and will be used for right-of-way access in the operation & maintenance of water meters and related substructures installed at this property. The water mains and fire hydrants for this business development are private water mains and hydrants and will be maintained by the Owner's Association for the development. FISCAL IMPACT All costs associated with the processing of this grant of easement are borne by the developer. There is no cost to the City. Prepared by: Chet Anderson, Asst. Director - Water Operations; Nguyen Bui, Engineer. Asst. 021 RESOLUTION NO. A RESOLUTION OF THE UTILITY BOARD/CITY COUNCIL OF THE CITY OF AZUSA ACCEPTING A CERTAIN GRANT OF EASEMENT AND DIRECTING THE RECORDING THEREOF. The Utility Board/City Council of the City of Azusa does hereby resolve as follows: SECTION 1. That certain Grant of Easement executed by WC HOMES, LLC under the date of June 11, 2008, granting to the CITY OF AZUSA, a Municipal Corporation in Los Angeles County, California, its successors and assigns, the right to perpetual easement and right of way solely for the purpose of to construct, operate, maintain, use, repair, alter, replace, inspect and remove at any time and from time to time water supply meter systems (hereinafter referred to as "Systems"), consisting of, but not limited to, underground conduits, vaults, manholes, handholes and including above -ground enclosures, markers and other appurtenant fixtures and equipment necessary or useful for metering water to the property, in, on, over, under, across and along the following described real property situate in the City of West Covina, County of Los Angeles, State of California to witch: See Exhibits "A" & `B" attached hereto and made a part hereof. Said Grant of Easement is hereby accepted, and the City Clerk is hereby authorized and directed to cause the same to be filed for record in the office of the County Records of said County. SECTION 2. The City Clerk shall certify to the adoption of this Resolution. PASSED, APPROVED AND ADOPTED THIS day Joseph Rocha, Mayor ATTEST: Vera Mendoza, City Clerk I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Utility Board/City Council of the City of Azusa at a regular meeting of the Azusa Light & Water Utility Board on the UB MEETING DATE. AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: Vera Mendoza, City Clerk 022 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: The Cite- of Azusa Licht and Water Department T9 North Azusa Avenue F. 0. Box 9500 Azusa, CA 91702 (SPACE AnoNT1'H IS LINE FOR RECORDER'S USE) GRANT OF PERMANENT EASEMENT FOR VALUABLE CONSIDERATION. receipt of which is hereby acknowledged, WC Homes, LLC, Owner ("Grantor"), does hereby grant to the CITY 01= AZUSA, CALIFORNIA, a municipal corporation, its successors and assigns. and its and their employees, contractors and agents ("Grantee"), the permanent easement and right-of-way to construct, operate, maintain, use, repair, alter, replace, and remove at any time and from time to time the water meters (hereinafter referred to as "Systems"), necessary or useful for distributing water on. over, under, in, along, and across the following described parcel of real property situated in the City of West Covina. County of Los Angeles, State of California: As described in Exhibit "A" and depicted in Exhibit "B" attached hereto and made a part hereof. Tovether with all necessary and convenient means of ingress and egress to and from said right- of-way or strip or parcel of land, free from any and all buildings. equipment, vegetation. combustible materials, or obstructions of any kind, for the purpose of constructing, reconstructing, maintaining, operating, repairing.. renewing, replacing, using, altering. or removing in any manner the Systems together with any and all of the purposes hereinbefore mentioned. TO HAVE AND TO HOLD the above granted and described premises unto the CITY OF AZUSA, CALIFORNIA, its successors and assigns forever. Ilk IN WITNESS HERETO. Grantor has executed this Grant of Permanent Easement this /day ofd" 2008. WC Homes, LLC By: Daffdl. Cook Its: D STATE OF i, ) CAPACITY CLAIMED BY SIGNER 1 COUNTY OF l�6 S y- 1 I.✓� C-.` �7 ) INDIVIDUAL(S) - On this ��"fu ,2008 beforeme,T`nP•f-'r�N �V ,C> -a , personally appearedAn ✓ w i - • c+df�- , who proved to me on the basis of satisfactory evidence to be the person(s) whose names) istare subscribed to the CORPORATE OFFICER(S) TITLE(SI - PARTNER(S) within instrument and acknowledged to me that he/she/they executed the same in his/herRhelr authorized capacity(ies), and that by hislherltheir signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed - ATTORNEY-IN-FACT - TRUSTEE(S) the instrument - SUBSCRIBING WITNESS I certify under penalty of perjury under the laws of the state of California that the foregoing - GUARDIAN/CONSERVATOR paragraph is true and currect - OTHER: Witness my hand and official seal, 11i4RTM 9. CL04KAMM Commisston N 1577778 r. Nolpry puWk-C01KprNc Lw Angeles Courtly Cunvn, fuq�hes May 10, SIGNER IS REPRESENTING. NAME OF PERSON(S) OR ENTITY(IES) _1My SIGNATURE OF NOTARY ATTENTION NOTARY: Although the information requested below is OPTIONAL, it could - Title or Type of Document prevent fraudulent attachment of this certificate to unauthorized documents Number of Pages THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED AT Date of Document RIGHT: Signer(s) Other Than Named Above 024 EXHIBIT "A" LEGAL DESCRIPTION Lot "A" of Tract Number 62346 in the City of West Covina, County of Los Angeles, State of California for condominium pug)oses as shown on map filled in book t353, pages 3 through 7, inclusive of maps, records of Los Angeles County. 025 EXHIBIT "B" LOCATION MAP See lot "A" shown on the attached Tract Map no. 62346 as shown on map filled in book 1353, pages 3 through 7, inclusive of maps, records of Los Angeles County. 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M 1. xVlAi el.-e:a-a•Fr • eea. s y� nmrFr FUG+ Ra KTtwA. •n a. ycrzM,m .s • ' •w s+1rlrel.en ar 1Ja fIY f{C 14 iq. nI W 1 )A 4.P[K[ ft' r!a y . ry ' 43' Yi 4RC ^l: t !!S (y SiC !4 Il: MDV 61W aµ.Qi tt (9)11(OW �ti LsI� - l i ' 1 F •.pR rgMfn F1 9 t / xnnFn .wx - I '-Mj� lO MA(f LRi IDWEI I• M 1 riYt li iSCu tOW f.]' RF kl. a�{pKa Xd alilw Ln YIX LA:M1'L•n/•p40.1. 11 -SM-L MIIR.^.A fCYM W"GbE:t� .S tOT oao T . - 2(r '77"IMA C7 77196 01-74.7FAII S""' OF 5 SHEETS N THE CRY OF WEST COVMA COUNTY OF LOS ANGMUM SrrXTU OF CALWORMA Flo" OOMDOMAuum Pupposes LOT "Ao 44 4v 43 b 42 41 Mo Ir J 45 HED FL , E &VATPON 47L. 60 48 -57 Al 1--.- '-V LOT "Ao 44 4v 43 b 42 41 Mo Ir J 45 50 J,� 51 J�i 52 N; 53 031 47L. 60 48 56 449 9 64 yr A 7 L07 1- 1; 50 J,� 51 J�i 52 N; 53 031 A4J$A CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES(3\ ^\� DATE: FEBRUARY 23, 2009 SUBJECT: ADDITIONAL COMPENSATION TO WREN & ASSOCIATES FOR INSPECTION ON PROJECT W-245 WATER MAIN REPLACEMENT IN FIRST STREET, ET AL, IN THE CITY OF AZUSA. RECOMMENDATION It is recommended that the Utility Board/City Council approve the addition of $3,800 to the Wren & Associates Contract for Inspection Services on Project W-245 water main replacement in First Street, et al. BACKGROUND At its March 24, 2008 regular meeting, the Utility Board approved a $21,000 Professional Services Contract with Wren & Associates to perform inspection of water pipeline installation for project W-245, First Street, et al. Due to subsequent unanticipated but allowable delays, an addition of $9,500 to the Wren contract was approved by the Utility Board at their September 22, 2008, regular meeting. In completing the project, the contractor accrued additional non approved delays requiring additional inspection time by Wren, resulting in additional inspection costs of $3,800. FISCAL IMPACT This request has a fiscal impact of $3,800. The additional payments to Wren approved will be funded from the Capital Improvement Budget Account 32-80-000-000-7130/72107B-7130, and will be offset by revenues from liquidated damages assessed on the construction contractor. The total Wren contract is $34,300.00. Prepared by: Chet F. Anderson, P.E., Assistant Director- Water Operations 032 AZUSALIGHT % CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES DATE: FEBRUARY 23, 2009 SUBJECT: ADDITIONAL COMPENSATION TO SA ASSOCIATES FOR INSPECTION ON PROJECT WVF-243 WATER TREATMENT PLANT WATER MAINS AND SEWER FORCE MAIN INSTALLATION IN THE CITY OF AZUSA. RECOMMENDATION It is recommended that the Utility Board/City Council approve the addition of $5,900 to the SA Associates Contract for Inspection Services on Project WVF-243 Installation of Water Treatment Plant Water Mains and Sewer Force Main in the City of Azusa. f1 MG)"feiKe1801- At their March 24, 2008 regular meeting, the Utility Board approved a Professional Services Contract in the amount of $60,000.00 to SA Associates to provide inspection services on Project WVF-243, Installation of Water Treatment Plant Water Mains and Sewer Force Main in the City of Azusa. Due to excusable delays in the time required for the contractor, Ken Thompson, to complete the project, an additional $5,900.00 is necessary to compensate SA Associates for additional inspection time spent on the project. FISCAL IMPACT This request has a fiscal impact of $5,900.00. The additional payments to SA Associates approved will be funded from the Capital Improvement Budget Account 32-80-000-721- 7130/7210713-7130. 2-80-000-721- 7130/72107B-7130. Prepared by: Chet F. Anderson, P.E., Assistant Director- Water Operations 033 10- 1'Li AZUSA IIGNi A'SA CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIE,S!1 DATE: FEBRUARY 23, 2009 SUBJECT: APPROVAL TO SEEK BIDS FOR THE INSTALLATION OF PROJECT WV - 262 - WATER MAIN REPLACEMENT IN ROWLAND AVENUE IN WEST COV INA RECOMMENDATION It is recommended that the Utility Board/City Council approve the advertisement for, and solicitation of bids for Project WV -262 - Water Main Replacement in Rowland Avenue in the City of West Covina. BACKGROUND The Water Division has a program of replacing water mains that are experiencing problems with leaks and that are, for various reasons, experiencing flow and pressure problems. The mains to be replaced in this project have both leak problems requiring constant repair and deliver less flow than is optimal for current residential area standards. This project will allow the Water Division to lessen the probability of leaks within the streets to be paved by the City of West Covina. In all, approximately 3600 linear feet of 10 -inch water main and 2200 linear feet of 8 -inch water main will be replaced. Approximately 63 water services will be replaced concurrently with the installation of the new water main. The bid documents are available for public review at the 2"d floor counter at the Azusa Light & Water offices at 729 N. Azusa Avenue. FISCAL IMPACT There is no immediate fiscal impact to the bidding of this project. This item will be funded from Capital Improvement Project Budget No. 3 2-8 0-000-000-7 1 3 0/7 2 1 07B-7130. Prepared by: Chet Anderson, Assistant Director- Water Operations 034 8- A A7_USA t . l SA CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES DATE: FEBRUARY 23, 2009 SUBJECT: ADDITIONAL COMPENSATION TO SSC CONSTRUCTION, INC. FOR ADDITIONAL WORK ON PROJECT WVF-207 CANYON FILTRATION PLANT MEMBRANE TREATMENT UPGRADE AND EXPANSION RECOMMENDATION It is recommended that the Utility Board/City Council approve Change Order No. 14 for the addition of $93,005.85 to the SSC Construction, Inc. contract for construction of Project WVF- 207, Canyon Filtration Plant Membrane Treatment Upgrade and Expansion. BACKGROUND At their November 20, 2006 regular meeting, the Azusa City Council accepted the bid of SSC Construction, Inc. to construct Project WVF-207, Canyon Filtration Plant Membrane Treatment Upgrade and Expansion. At the time of bidding on the Treatment Plant project, a landscape architect had not been chosen nor had a landscape plan been prepared. In order for all the bidders on the Treatment Plant project to bid on the same footing, an allowance of $75,000 was made a line item in the bid, $15,000 for the landscape architect services and $60,000 to pay for landscaping on the Treatment Plant site. Black & Veatch, the construction management company retained to oversee construction of the Treatment Plant, hired a landscape architect themselves, so $15,000 was eliminated from the landscape allowance, leaving $60,000 for the landscaping. SSC Construction obtained bids from four landscape contractors and the bid results are as follows: Marina: $145,300 P.G.&J: $159,500 Terra Form: $163,349 Plaza Landscape: $220,816 035 Black & Veatch is recommending Marina be selected by approving Change Order No. 14 (SSC Change Order Request 24), which also includes $2,400 for additional electric work associated with the landscaping, and $5,305.85 for bonds and insurance costs. Because of an existing Landscape Allowance of $60,000, this amount is deducted from the Change Order dollar amount, resulting in net cost of Change Order Request No. 14 in amount of $93,008.85. Staff have reviewed the landscape bids submitted to SSC Construction and Black & Veatch and agrees with the recommendation to select Marina. FISCAL IMPACT This request has a fiscal impact of $93,005.85 and sufficient funds are available in existing Capital Improvement Project budget account 32-80-000-000-7130/ 72107C-7130. There is no change to the Contract Time of Completion. Prepared by: Chet Anderson, Assistant Director- Water Operations 036 BLACK & VEATCH 6uHElna a Yi Or I d nl ElHerence• f NEPGY \'NI ES IN `OR M.,10N GOV, RN ME riI City of Azusa Canyon Filtration Plant Membrane Treatment Upgrade and Expansion Mr. Chet Anderson, P.E. Assistant Director of Utilities- Water Operations Azusa Light & Water 729 N. Azusa Avenue Azusa, CA 91702 Dear Mr. Anderson: B&V Project 140777 B&V File I.6 February 516, 2009 Subject: Change Order No. 14 Black & Veatch (B&V) is furnishing this letter as an update for Change Order No. 14 for SSC Change Order Request (COR) 24. COR 24: Landscaping Allowance Cost Difference Contract Specification 01025 provides an allowance of $60,000 to be included in the SSC's bid for Landscaping and Irrigation services. SSC solicited bids from several Landscaping companies and the selected bid was $145,300.00 from Marina Landscape, Inc. SSC has submitted a change order request in the amount of $93,005.85, which includes the cost difference between the allowance and the selected bid from Marina Landscape, Inc. ($85,300.00), additional electrical work ($2,400.00), and contractor's markup and bonds, and insurance cost ($5,305.85). B&V has reviewed Change Order No. 24 and recommends acceptance, including changes to the contract price. Summary: The table below provides a summary of the Change Order Requests included in this package. The final change order value is $93,005.85. B&V recommends approval of this addition to the contract price. Black 8 Vealch Colporabon • 15615 Allon Parkway, S0000 - Irvine, California 92618 USA - Telephone 949753.D500 - Fa. 949.753.1252 037 AZUSA LIGHT AND WATER CHANGE ORDER Order No. 14 Date February 5, 2009 Agreement Date January 17. 2007 Sheet. I of 3 Owner: Azusa Light and Water Project: Canyon Filtration Plant Upgrade and Expansion Contractor: SSC Construction Inc. The following changes are hereby made to the Contract Documents: Landscaping Allowance Cost Difference (Reference SSC Change Order Request 24) Justification ADD DEDUCT $93,005.85 NET COR AMOUNT (ADD) $93,005.85 I. (Reference SSC Change Order Request 24) Contract Specification 01025 provides an allowance of $60,000 to be included in the SSC's bid for Landscaping services. SSC solicited bids from several Landscaping companies and the selected bid was $145,300.00 from Marina Landscape, Inc. SSC has submitted the cost difference between the allowance and the selected bid as a Change Order. SUAfAfARY Change Orders CHANGE TO CONTRACT PRICE Original Contract Price Current Contract Price Adjusted By Previous Change Order(s) Contract Price due to this Change Order will be (increased) New Contract Price, Including this Change Order $93 005.85 Add (Net) $ 35,905,500.00 $ 36.422.696.30 $ 93,005.85 $ 36,515.702.15 M; la CHANGE TO CONTRACT TIME: Contract Time Will Be Increased by Date of' Completion of'Al l Work APPROVED: Owner: Azusa Light & Water By: Chet Anderson Engineer: Black & Veatch t By: ✓ r ... �. __ Ashu Shirolkar, Project Manager (Calendar Days) December 17, 2008 Contractor: SSC Construction, Inc. Aorized Signature " 1— B • A7_U5A � I11 • SA CONSENT CALENDAR TO: HONORABLE MAYOR AND MEMBERS OF THE AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES DATE: FEBRUARY 23, 2009 SUBJECT: WATER SUPPLY AGREEMENT WITH MILLER COORS LLC. RECOMMENDATION It is recommended that the Azusa Utility Board/City Council approve attached amended and restated water supply agreement with MillerCoors LLC. BACKGROUND The City entered into a Water Supply Agreement ("Agreement") with Miller Brewing Company in 2002, which was later assigned to Miller Breweries West, L.P. ("Miller") in 2004 with the City's consent. In general, the Agreement provides, among other things, for the delivery of water to Miller from the Canyon Basin by the City, at certain rates and the use by the City of Miller's water rights. The Agreement was amended on May 1, 2008, and authorized assignment of the Agreement to MillerCoors LLC. On November 26, 2008, the agreement was extended to allow parties time to discuss various issues, including the agreement term and the City's possible use of wells/pumps at Miller's Irwindale facility. At this time, it is recommended that the Utility Board adopt the attached amended and restated agreement which will continue water supply to MillerCoors through May 31, 2013, and provide MillerCoors with options to extend the term of the agreement three times in increments of 5 -years for each extended term. Supplied water is to come from MillerCoor's prescriptive pumping rights which are leased to the City pursuant to agreement terms. The City will charge MillerCoors for the supplied water and have an obligation to maintain pipeline to their Irwindale facility. MillerCoors would be required to comply with water curtailment conditions in event of emergencies and droughts. At any time following the anniversary date of this agreement amendment, MillerCoors is obligated to meet with the City concerning the City's possible use of MillerCoors' main basin wells and pumping facilities. 1 FISCAL IMPACT Sales to MillerCoors amounted to about $990,000 in revenue to the City's water utility last fiscal year. Adoption of this agreement amendment continues service and billings. Prepared by: Cary Kalscheuer, Assistant to the Director of Utilities M FISCAL IMPACT Sales to MillerCoors amounted to about $990,000 in revenue to the City's water utility last fiscal year. Adoption of this agreement amendment continues service and billings. Prepared by: Cary Kalscheuer, Assistant to the Director of Utilities 042 AMENDED AND RESTATED WATER SUPPLY AGREEMENT This Amended and Restated Water Supply Agreement ("Agreement") is made as of February _, 2009 between MillerCoors LLC, a Delaware limited liability company ("MillerCoors"), and the City of Azusa, California, a California municipal corporation (the "City"). All capitalized terms used in this Agreement shall have the meanings given to them in Section 2. Recitals 1.1 MillerCoors and the City are parties to the Existing Agreement which, among other things, assigned MillerCoors' Prescriptive Pumping Rights to the City from time to time in exchange for long term access to a supply of City Water. 1.2 The Parties desire to enter into this Agreement to amend and restate (but not terminate) the Existing Agreement in its entirety to reflect updated terms agreed to by the Parties. NOW THEREFORE, the Parties agree as follows. 2. Definitions "AAA" shall mean the American Arbitration Association. "Acre Foot" shall mean a measure of liquid volume equivalent to three hundred twenty- five thousand, eight hundred and thirty (325,830) gallons or four hundred thirty-five and six tenths (435.6) CCFs. "Additional Water" shall mean any City Water provided by the City to the Facility during a year of the Term which exceeds the MillerCoors Water Allotment for that year. "Additional Water Rate" shall mean the rate that the City may charge to MillerCoors for the Additional Water. The Additional Water Rate shall be equal to the rate charged by the Water District to the City for such Additional Water. "Agreement" shall mean this Amended and Restated Water Supply Agreement. "Award" shall mean an arbitrators' award made pursuant to Section 13. "Blended Water" shall mean water provided by the City to the Facility during a Water Emergency only, which may consist of a blend of water from the Upper Basin and surface water. Blended Water shall in no event include water from the Main Basin. Blended Water shall meet or exceed all Federal, state and local drinking water regulations and standards. "California Government Code" shall mean the Government Code of the State of California. OHS Wmt:260381265.8 ((yy 8966-1 A5S/MAA V 43 "California Public Contracts Code" shall mean the Public Contracts Code of the State of California. 'California Water Code" shall mean the Water Code of the State of California. "CCF" shall mean a measure of liquid volume equivalent to one hundred (100) cubic feet or seven hundred and forty-eight (748) gallons. "City" shall mean the City of Azusa, California, a California municipal corporation. "City Council" shall mean the elected members of the City Council of the City at the applicable time referenced in the Agreement. "City Officers" shall mean the officers of the City empowered to act for the City. "City Water" shall mean the water that the City provides to MillerCoors under this Agreement. All City Water shall meet or exceed all Federal, state and local drinking water regulations and standards. City Water shall be taken completely and solely from the Water Source and shall not be blended or mixed with water from the Main Basin or any other source, except for the provision of Blended Water during a Water Emergency in accordance with the terms of this Agreement. "Current Term" shall mean the term of this Agreement which commenced on the expiration of Initial Term, running for a period of five (5) years, and expiring on May 31, 2013. "Event of Force Maieure" shall mean any accident, fire, explosion, casualty, epidemic, act of God, public disaster, terrorist attack, riot, earthquake, storm, tornado, landslide or act of war which is beyond the control of the City or MillerCoors and which causes an interruption or suspension of or materially hampers, interferes with or delays the performance or completion of any material obligations or duties of a Party under this Agreement (but excluding in all cases any Water Supply Curtailment Condition). "Excess Rate" shall mean a rate for water that is in excess of three percent (3%) of the rate for a CCF during the first year of the Current Term, or during the first year of any Extended Term. "Exhibit" shall mean an exhibit to this Agreement. Each Exhibit is incorporated into this Agreement by this reference. "Extended Term" shall mean an extended term of this Agreement. The first Extended Term shall run for five (5) years following the end of the Current Term. The second Extended Term shall run for five (5) years following the end of the first Extended Term. The third Extended Term shall run for five (5) years following the end of the second Extended Term. "Existing Agreement" shall mean that certain Water Supply Agreement between Miller Brewing Company and the City, dated as of February 26, 2002, as amended by Amendment No. 1 to Water Supply Agreement, dated May 1, 2008, and by a letter agreement between the Parties OHS We t:260381265.8 0� 8966-1 A5S/MAA 2 dated as of November 26, 2008. The rights and obligations of Miller Brewing Company under the Existing Agreement have been assigned to MillerCoors with consent of the City. "Facility" shall mean the MillerCoors brewery facility located at 15801 East First Street, Irwindale, California 91706-2089. "Flow Rate" shall means the daily rate at which the City delivers City Water to the Facility. The Flow Rate shall be between twenty thousand (20,000) gallons and two million five hundred thousand (2,500,000) gallons per twenty-four (24) hour period. "Initial Term" shall mean the term of the Existing Agreement which commenced on the Supply Date and expired five years following the Supply Date on May 31, 2008. "Judgment" shall mean the judgment, as amended, rendered in Upper San Gabriel Vallev Municipal Water District v. City of Alhambra, Superior Court of California case number 924128. "Main Basin" shall mean the Main San Gabriel Basin, which is more particularly described on Exhibit E. "Maximum Monthly Delivery" shall mean a cumulative total of two million five hundred thousand (2,500,000) gallons per twenty-four (24) hour period multiplied by the number of days in each calendar month. MillerCoors shall be subject to a penalty amount equal to fifty (50%) percent of the Permitted Rate then in effect for each gallon delivered in any calendar month in excess of the Maximum Monthly Delivery. "MillerCoors" shall mean MillerCoors LLC, a Delaware limited liability company. "MillerCoors Lease" shall mean a lease to the City by MillerCoors of all or a portion of MillerCoors' Prescriptive Pumping Rights for a year of the Term. Each MillerCoors Lease shall be in the form attached as Exhibit B. "MillerCoors' Prescriptive Pumping Ri is ' shall mean MillerCoors' rights to use or pump water as determined on an annual basis by the Watermaster pursuant to the Judgment. MillerCoors' Prescriptive Pumping Rights as reflected in the records of the Watermaster are generally described in the documents listed on Exhibit A. "MillerCoors Water Allotment" shall mean an amount of City Water equivalent to the annual amount of water that MillerCoors is entitled or authorized to use or pump pursuant to MillerCoors' Prescriptive Pumping Rights, and leased to the City under a MillerCoors Lease. "MillerCoors Wells" shall mean the two production water wells operated by MillerCoors and located at the Facility. "Municipal Code" shall mean the Municipal Code of the City. "Parties" shall mean the City and MillerCoors, and "Party" shall mean the City or MillerCoors, as applicable. OHS Wes1:260381265.8 8966-1 A5S/MAA 3 045 "Permitted Rate" shall mean the rate charged to MillerCoors for City Water determined using the formula set forth on Exhibit D. "Person" shall mean any natural person, company, corporation, partnership, limited liability company or other entity. "Pipeline" shall mean the water pipeline from the Water Source to the Facility constructed pursuant to the Existing Agreement. The Pipeline is dedicated solely for the purpose of providing City Water to the Facility during the Term of this Agreement. "Replacement Water" shall mean water that is obtained by and physically delivered to the City from and within the boundaries of the Water District to replenish water supplies otherwise available to the City within the Water District. Replacement Water shall not include Supplemental Water. "Section" shall mean a section in this Agreement. "Supplemental Water" shall mean water that is obtained by and physically delivered to the City from the Metropolitan Water District or other parties (but not the Water District or Watermaster) to replenish water supplies otherwise available to the City provided that (i) Supplemental Water shall only be purchased by the City when Water Supply Curtailment Conditions are in effect, and (ii) Replacement Water is not otherwise available. "Supplemental Water Rate" shall mean the rate charged to the City from time to time for water the City purchases from the Metropolitan Water District or other parties as Supplemental Water. "Supply Date' shall mean June 1, 2003, which was the first day of the month following the date MillerCoors first received City Water at the Facility under the Existing Agreement. "Term" shall mean the term of this Agreement. The Term shall include the Initial Term, the Current Term and all Extended Terms. "Termination" shall mean the termination of this Agreement pursuant to Section 7 or as otherwise provided for in this Agreement "Unused Water Ri is ' shall mean the amount by which the sum of (i) the amount of City Water that is delivered to the Facility under this Agreement in any year of the Term, plus (ii) the amount of water produced by MillerCoors from the MillerCoors Wells during such year, is less than (iii) the amount of water that MillerCoors is entitled or authorized to use or pump pursuant to MillerCoors' Prescriptive Pumping Rights for that same year. "Upper Basin" shall mean the Upper San Gabriel Canyon Basin. The boundaries of the Upper Basin are more particularly described in maps and documents held or created by the Watermaster. "Water District" shall mean the Upper San Gabriel Valley Municipal Water District. OHS Wmt:260381265.8 8966-1 A5S/MAA 4 046 "Water Emergency" shall mean an interruption of deliveries of City Water to the Facility on account of an Event of Force Majeure, where the City fails to provide City Water to the Facility at the Flow Rate for four (4) consecutive hours. "Water Filtration Plant" shall mean the water filtration plant constructed and operated by the City and located at 1870 Ranch Road, Azusa, California 91702, which plant shall treat surface water available to the City from the San Gabriel River (which may include water sourced from the California State Water Project and the Colorado River), and which shall not treat water from any other source, including from the Main Basin. "Watermaster" shall mean the San Gabriel Basin Watermaster established pursuant to the Judgment. "Water Source" shall mean the reservoir located at 34"-8'-40" North / 117°- 54'- 3" West from which the City will supply City Water for the Facility. All water in the reservoir at the Water Source shall be obtained solely from (i) wells pumping from the Upper Basin or (ii) the Water Filtration Plant. No water in the reservoir at the Water Source will be blended or mixed with water from any other source. "Water Supply Curtailment Conditions" shall mean conditions or circumstances limiting or restricting the ability of the City to supply water to its customers generally or the ability of the City to deliver water to the Facility from the Water Source at the Flow Rate, including (i) laws, regulations or orders applicable to the City affecting the City's right or ability to sell or deliver water; (ii) unavailability to the City, the Water District or the Watermaster of Replacement Water or Supplemental Water; and (iii) drought conditions. 3. Water Deliveries 3.1 The City shall supply the Facility, throughout the Term, by means of the Pipeline and subject only to Water Emergencies and Water Supply Curtailment Conditions, City Water at the Flow Rate. The Flow Rate for each day shall be the amount of City Water that MillerCoors requires, or elects to accept, for operation of the Facility. 3.2 MillerCoors shall have and maintain the right to produce water from the MillerCoors Wells for use at the Facility (i) during the duration of any Water Emergency; (ii) during the duration of any Water Supply Curtailment Condition; (iii) at any time that water use requirements at the Facility (whether in its current configuration or as renovated or expanded) exceed the Flow Rate; and (iv) at such other times as the City and MillerCoors may agree, provided that, in the event that MillerCoors elects not to or otherwise is unable to produce water from the MillerCoors Wells under such circumstances, the limitations on the City's obligation to deliver City Water set forth in Section 9.5 shall not be affected. 3.3 At any time and from time to time following the first anniversary of the date of this Agreement, but not more frequently than once each calendar year during the Term of this Agreement, either Party may submit a written request to the other Party requesting a meeting to discuss the possibility of reaching an agreement regarding additional or revised operations of the MillerCoors Wells for the extraction, delivery and use of water from said wells. In the event such a written request is made, the Parties shall then engage in good faith negotiations regarding OHS Wat:260381265.8 8966-1 A5S/MAA 5 047 such a possible agreement for a period of 30 days from the date of the written request, unless said period is extended upon mutual consent of both Parties. The determination of each Party as to whether to enter into any agreement pursuant to this paragraph shall be and remain in such Party's respective sole discretion. 4. MillerCoors' Obligations 4.1 MillerCoors shall enter into a MillerCoors Lease with the City for each year of the Term. Each MillerCoors Lease shall lease to the City, for the year in question, all or a portion of MillerCoors' Prescriptive Pumping Rights equal to the amount of City Water delivered to the Facility pursuant to this Agreement during the year in question, up to the maximum amount of MillerCoors Prescriptive Pumping Rights for such year. The Parties shall cooperate to adjust any MillerCoors Lease from time to time to reflect the provisions of this Section. Each MillerCoors Lease shall be subject to all of MillerCoors' rights under this Agreement, including. MillerCoors' rights of reversion upon the Termination or expiration of this Agreement. During the period that any MillerCoors Lease is effective, MillerCoors shall have and retain the right (in its own name and without the consent of the City) to protect MillerCoors' interest (including any reversionary interest) in MillerCoors' Prescriptive Pumping Rights by bringing suit, instituting proceedings, appearing before administrative bodies, defending suits and claims, lobbying or taking (or forbearing from taking) any other actions MillerCoors deems necessary or advisable in its sole discretion, including taking any action in relation to the decisions or actions of any third parties (including the Watermaster). 4.2 MillerCoors shall pay for City Water at the Permitted Rate, or, as applicable, the Additional Water Rate or the Supplemental Water Rate in accordance with Section 6. Any bill for City Water to MillerCoors shall be due at the close of business on the twentieth (20`h) calendar day following the City's presentation of the bill to MillerCoors, in accordance with the City's rules and regulations. If the bill is not paid within the aforementioned twenty (20) calendar day period it shall be subject to a late payment penalty as provided for in the applicable City's regulations. If a bill is not paid within the twenty (20) calendar day period the City shall send a payment reminder to MillerCoors on the twenty-first (21 51) calendar day notifying MillerCoors of the past due status, as such reminders or notices may be provided for under the City's rules and regulations. The City shall provide to MillerCoors access to MillerCoors' water bills "on-line" and shall provide MillerCoors with a password to allow internet access to MillerCoors' bills. In addition, the City will notify MillerCoors of the day of the month on which the bill is typically sent so that. MillerCoors can check both in the mail and "on-line" for such bill. 4.3 All billings by the City to MillerCoors for the City Water shall be addressed as follows: MillerCoors Attention: Plant Manager 15801 East First Street Irwindale, California 91706-2089 savastano.philip@millercoors.com OHS Ww:260381265.8 8966-1 A5S/MAA 6 048 5. The City's Obligations 5.1 The City owns and shall maintain the Pipeline at its sole cost and expense. The City has the right to depreciate the Pipeline in accordance with the standards used by the City for similar structures. 5.2 The City shall keep the Pipeline in good repair and condition in accordance with best utility practices and on the same priority as other water supply facilities of the City. The City shall keep the Pipeline operational throughout the Term of this Agreement. 5.3 The City shall assume MillerCoors' administrative duties and obligations under the Judgment and regulations of the Watermaster with respect to MillerCoors' Prescriptive Pumping Rights which are subject to a MillerCoors Lease, thereby relieving MillerCoors of such duties and obligations, including but not limited to any so-called reconciliation of water use, carryover provisions or the obligation to purchase the applicable amount of water per year from the Watermaster at the rates set by the Watermaster for MillerCoors' Prescriptive Pumping Rights covered thereby. Without limiting the foregoing, the City agrees to file or record any MillerCoors Lease with (i) the Watermaster; (ii) the Water District and (iii) with any other required or allowed state or municipal agencies at which such filing or recordation may be required or allowed by law. Notwithstanding any provision in this Agreement to the contrary, the City shall not be obligated to pay any assessments in connection with MillerCoors' Prescriptive Pumping Rights. The City agrees to promptly provide MillerCoors with any third party notices that it receives requesting such payments. 5.4 The City shall not use the Pipeline to provide water to any other customers of the City or for the City's own use and will not allow any other Person to have access to the water in or from the Pipeline during the Term. 6. Water Rates and Division of Unused Water Rights Proceeds 6.1 Subject to the remaining provisions of Section 6, the City shall charge MillerCoors for City Water delivered under this Agreement at the Permitted Rate under the billing procedures set forth in Section 4.2. The Permitted Rate shall be adjusted as of May 1, 2010, and every two years'thereafter during the Term. The adjustment shall be made in accordance with the methodology set forth in the memorandum included as Exhibit D. The Permitted Rate shall be adjusted on the schedule and pursuant to the provisions of this Section 6.1 regardless of any adjustments the City otherwise may make to commercial water rates charged to customers of the City generally. 6.2 The City may charge MillerCoors for Additional Water at the Additional Water Rate and, subject to the provisions of Section 6.4, Supplemental Water at the Supplemental Water Rate, in each case under the billing procedures set forth in Section 4.2. 6.3 If MillerCoors does not use the full amount of the MillerCoors Water Allotment in any fiscal year it shall have no obligation to purchase any Unused Water Rights for the applicable fiscal year. To the extent there are any Unused Water Rights for a fiscal year under this Agreement, the City agrees that it shall use its best efforts to sell, transfer or lease such Unused Water Rights for the benefit of itself and MillerCoors. The City agrees that to the extent OHS Wut:260381265.8 8966-1 A5S/MAA 7 049 that it sells, transfers or leases the Unused Water Rights it shall credit MillerCoors' account with the City's water department (against sums due or to become due) in an amount equal to one-half of the total amount received for the Unused Water Rights. 6.4 The City may charge MillerCoors for Supplemental Water at the Supplemental Water Rate subject to the provisions of this Section 6.4. If the City determines that, on account of a Water Emergency or Water Supply Curtailment Conditions, and the unavailability of Replacement Water, the City is required to purchase Supplemental Water to fulfill its water sales and delivery obligations to customersof the City, the City shall promptly notify MillerCoors of (i) its intention to so purchase Supplemental Water, (ii) the amount of Supplemental Water proposed to be purchased and the price which the City will pay for Supplemental Water and (iii) the total amount of water deliveries required to be made by the City to customers and which will be supplemented by Supplemental Water. Miller shall promptly notify the City of its election to either accept Supplemental Water as a supply source, or not to accept Supplemental Water and instead to receive City Water at a reduced Flow Rate which the City is able to deliver without the use of Supplemental Water. In the event that MillerCoors elects to receive City Water which includes Supplemental Water, then MillerCoors shall pay the Supplemental Water Rate for an allocable portion of City Water delivered to MillerCoors based on the amount of Supplemental Water purchased by the City in relation to the total amount of water deliveries made by the City, but in no event shall the Supplemental Water Rate apply to deliveries to MillerCoors in excess of 1.5 million gallons per day. In the event the City determines that the Water Emergency or Water Supply Curtailment Conditions further reduce the City's ability to deliver water to customers of the City, thereby requiring the purchase and delivery of additional amounts of Supplemental Water as a supply source for MillerCoors, the Parties shall meet to discuss the impacts of the applicable Water Emergency or Water Supply Curtailment Conditions and the potential for a mutually acceptable altemative arrangement which may include the delivery of additional amounts of Supplemental Water. MillerCoors shall have no obligation to pay for any water at the Supplemental Water Rate for any day on which the City is not required to purchase Supplemental Water in order to meet the Flow Rate under this Agreement. Term of Agreement; Termination 7.1 The Term of this Agreement shall include the Initial Term, the Current Term and any Extended Term, unless this Agreement is subject to earlier Termination. 7.2 MillerCoors, at its sole election, shall have the option, to be exercised by written notice to the City at any time prior to the expiration of the Current Term (or any Extended Term), to extend the Term to include up to three (3) additional Extended Terms. 7.3 If the City should seek or propose to deliver or provide City Water to MillerCoors at or above the Excess Rate, MillerCoors shall have the right to cause a Termination of this Agreement. In the event MillerCoors exercises its right of Termination, MillerCoors shall have no further obligations hereunder, including, but not limited to, the obligation to take and pay for the City Water. 7.4 Upon Termination or expiration of this Agreement, any MillerCoors Lease shall terminate and MillerCoors' Prescriptive Pumping Rights shall automatically revert and shall be OHS Ww:260381265.8 8966-1 A5S/MAA 050 reassigned to MillerCoors. Concurrently with the execution of this Agreement, the City shall execute, acknowledge and deliver to MillerCoors, the Termination of the MillerCoors Lease attached as Exhibit C. MillerCoors may file or record the Termination of the MillerCoors Lease with the Watermaster, the Water District and with any other required or allowed state or municipal agencies at which such filing or recordation may be required or allowed by law, immediately upon Termination or expiration of this Agreement. 7.5 The City shall not be liable for any damages arising under this Agreement except where the City fails or refuses to deliver City Water to the Facility and such failure is the result of intentional misconduct or discriminatory actions, events or omissions or capricious actions, events or omissions or arbitrary actions, events or omission on the part of the City (including its agents). Any or all such damages, if any, payable by the City under this Agreement may be paid by the City providing City Water to the Facility and crediting MillerCoors for such City Water at the Permitted Rate until the full amount of the damages have been paid. 7.6 Notwithstanding Section 7.5, the City acknowledges that monetary damages would be insufficient to compensate MillerCoors for a breach by the City of its obligations under this Agreement. Consequently, the City agrees that MillerCoors is entitled to specific performance of this Agreement and to injunctive relief to ensure that the City continues to perform under this Agreement and does not act in breach thereof. The City agrees that it will not assert, argue, propose or suggest in any proceeding for a preliminary injunction (including before any court, arbitration panel or administrative body) that monetary damages are sufficient to fully recompense MillerCoors for the loss of the City Water. Additional Rights and Obligations of the Parties 8.1 The City will provide and maintain a meter at the Water Source that shall be used to measure the amount of the City Water provided to the Facility. MillerCoors will provide a separate meter at the Facility (which will be maintained by the City) to confirm the amount of water actually delivered to the Facility. In the event of any discrepancy between the two meters, MillerCoors and the City shall confer and endeavor to agree on any necessary adjustments. 8.2 All testing of City Water (including Blended Water) prior to delivery of the City Water to the Facility shall be the City's responsibility. All testing of the City Water (including Blended Water) after delivery to the Facility shall be the responsibility of MillerCoors. All water supplied by the City under this Agreement, including Blended Water, shall meet or exceed all Federal, state, and local regulations setting or affecting drinking water standards. Any required treatment, clean-up, blending or other steps required to meet the foregoing standards shall be at the City's expense. 9. Water Emergencies; Water Supply Curtailment Conditions 9.1 During a Water Emergency (or during any other disruption in the flow of the City Water to the Facility that lasts for more than four (4) consecutive hours), MillerCoors may pump water from the MillerCoors Wells to meet the water supply requirements at the Facility. 9.2 During a Water Emergency (but in no event to exceed twenty (20) consecutive days) the City may, with MillerCoors' consent, provide the Facility with Blended Water (through OHS Wwe260381265.8 8966-1 A5S/MAA 9 05 a separate connection to the City's water system or otherwise) in place of City Water. Such Blended Water shall be provided only during a Water Emergency and only if water from the Water Source is not otherwise available. The City shall, prior to providing such Blended Water, notify MillerCoors that it will be providing such Blended Water instead of City Water, and MillerCoors may elect to accept or reject such Blended Water. 9.3 The City shall, if possible and consistent with best utility practices, remedy any interruption or disruption in the supply of City Water to the Facility on account of a Water Emergency or otherwise within twenty four (24) hours of the occurrence of such interruption or disruption. If the City is unable to remedy such interruption or disruption within twenty four (24) hours, it shall no later than twenty four (24) hours following the interruption or disruption, provide to MillerCoors an assessment of the situation, including the need for repairs and an estimated timeline for making such repairs. The parties shall work together in good faith to determine and implement a plan to restore City Water to the Facility. If notwithstanding the above (and the Parties' attempt to develop a plan to restore City Water to the Facility) the City is unable or unwilling to cure an interruption or disruption in the City Water to the Facility within five (5) days of such interruption or disruption, then Miller shall have the right, but not the obligation, to provide licensed contractors (including third party contractors) to remedy any interruption or disruption in the supply of City Water to the Facility; provided however that such contractors shall act under the supervision of the City. It is acknowledged that the City is required to comply with requirements pertaining to public works construction projects. As a result, any such contractor who acts under the supervision of the City shall be required to perform my such work in accordance with the applicable requirements for public works construction projects. In the absence of mutual agreement, the proper allocation of the costs of such contractors between Miller and the City shall be determined in binding arbitration pursuant to Section 13. 9.4 If (i) a Water Emergency lasts for twenty (20) or more consecutive days, (ii) all Water Emergencies occurring during the Term of this Agreement last for a total of thirty (30) or more days or (iii) the City provides Blended Water to the Facility for more than twenty (20) consecutive days, then this Agreement is subject to Termination by MillerCoors pursuant to Section 7. 9.5 During any time in which Water Supply Curtailment Conditions are in effect, the City, after consultation with MillerCoors, may limit the amount of City Water delivered to the Facility, provided that (i) any reduction in or curtailment of deliveries shall affect all commercial water customers of the City, under nondiscriminatory ordinances, orders or regulations adopted by the City which shall treat MillerCoors on an equal footing with other commercial water customers of the City; or (ii) the applicable Water Supply Curtailment Conditions affect the physical ability of the City to deliver water at the Flow Rate from the Water Source because of the impact of such Water Supply Curtailment Conditions on the Upper Basin or the Water Source. MillerCoors may pump water from the MillerCoors Wells to meet the water supply requirements at the Facility during the continuance of any Water Supply Curtailment Conditions. The limitations on the City's obligation to deliver the City Water under this Section 9.5 shall only apply during the continuance of Water Supply Curtailment Conditions. OHS Wmt:260381265.8 8966-1 ASS/MAA 10 052 10. Events of Default 10.1 The failure by MillerCoors to comply with any of its material obligations under this Agreement within ten (10) days of receiving written notice of such default from the City shall constitute an Event of Default by MillerCoors under this Agreement. 10.2 Any of the following shall constitute an Event of Default by the City under this Agreement (provided that nothing herein shall limit the rights of MillerCoors pursuant to Section 2): (a) The failure by the City to supply City Water at the Flow Rate, if such failure is the result of intentional misconduct or discriminatory actions, events or omissions or capricious actions, events or omissions or arbitrary actions events or omission on the part of the City (including its agents), if the City fails to restore the supply of the City Water to the Facility within ten (10) business days of the interruption; and (b) The failure by the City to comply with any of its material obligations under this Agreement within ten (10) days of receiving written notice of such default from MillerCoors (which shall include, without limitation, City Water or Blended Water failing to meet or exceed all Federal, state and local drinking water regulations and standards). 10.3 Upon the occurrence of an Event of Default, the non -defaulting Party shall have all its rights at law or in equity (including without limitation the right to specific performance or injunctive relief). Without limiting the foregoing, the non -defaulting Party shall have the right to terminate this Agreement while retaining all its rights to assert damage claims against the defaulting Party, as such damages claims are limited by this Agreement. Nothing in this Section 10 shall limit MillerCoors' rights to specific performance or injunctive relief upon the occurrence of an Event of Default or upon Termination pursuant to Section 7. All rights of the Parties may be exercised cumulatively. 11. Representations and Warranties 11.1 MillerCoors represents and warrants to the City that: (a) It has the authority to enter into this Agreement and to perform its obligations hereunder; (b) In entering into this Agreement, it does not breach any other material agreements to which MillerCoors is a party; (c) It has taken all actions necessary under its charter, rules, bylaws and applicable state and local laws to obtain approval of this Agreement and to be able to fulfill its obligations under this Agreement; (d) To the extent, if any, MillerCoors is involved in a merger, acquisition or reorganization, any successor in interest to MillerCoors pursuant to such OHS Wmt:260381265.8 8966-1 A5S/M," 11 053 merger, acquisition or acquisition shall be fully bound under this Agreement. Notwithstanding the foregoing, if the successor in interest is not bound by this Agreement then the City shall have the right, at its election, to terminate this Agreement or to assert a default by MillerCoors. (or the successor in interest) under this Agreement; (e) MillerCoors' representations and warranties made under this Section 11 are a material inducement to the City to enter into this Agreement, and without such representations and warranties, the City would not so enter into this Agreement. Breach of any representations and warranties herein shall constitute a failure by MillerCoors to comply with its material obligations pursuant to this Agreement. 11.2 The City represents and warrants to MillerCoors that: (a) The City, and any other body to which the City has delegated or devolved any of the City's powers to perform the obligations provided for hereunder, have the authority to enter into this Agreement and to perform such obligations; (b) In entering into this Agreement, it does not breach any other material agreements to which the City is a party; (c) It has taken all actions necessary under its charter, rules, bylaws applicable state and local laws to obtain approval of this Agreement and to be able to fulfill its obligations under this Agreement; (d) The City's entry into this Agreement is in full compliance with its obligations under all applicable Federal, state and local laws, including without limitation, the California Government Code, the California Water Code, the California Public Contracts Code and the Municipal Code; (e) The City has fully disclosed this Agreement and its terms to all members of the City Council and to all of the City Officers, in accordance with the City's procedures for consideration and adoption of such an agreement; (f) The City's representations and warranties made under this Section 11 are a material inducement to MillerCoors to enter into this Agreement, and without such representations and warranties, MillerCoors would not so enter into this Agreement. Breach of any of the representations and warranties herein shall constitute a failure by City to comply with its material obligations pursuant to this Agreement; (g) The City represents and warrants that it will undertake no municipal merger, reorganization, join or participate in any regulatory or administrative body or participate in any judicial action which could or would affect MillerCoors' rights under this Agreement without giving MillerCoors at least ninety (90) days prior notice of such action. OHS Ww:260381265.8 8966-1 A5SIMAA 12 054 Notwithstanding the City giving the aforementioned Notice, any action described in the preceding sentence shall be grounds, at the sole election of MillerCoors, to terminate this Agreement or for MillerCoors to assert a default by the City under this Agreement; and (h) The City represents and warrants that it will take all actions (or if necessary refrain from all actions) necessary to insure that for as long as any of MillerCoors' Prescriptive Pumping Rights are leased to the City that they will stay in full force and effect and shall be transferred back to MillerCoors as set forth in this Agreement. This representation and warranty shall only apply to actions or omissions by the City and not to any actions or omissions by third parties, or other events that may impact MillerCoors' Prescriptive Pumping Rights including, by way of example only, any activities by the Watermaster. The City agrees to promptly provide MillerCoors with notice of any such act, omission or activity of which the City becomes aware. 12. Indemnity, Limitations Of Liability And Assumption Of Financial Responsibility 12.1 MillerCoors shall indemnify and hold harmless the City and its directors, officers, employees, and agents from any and all claims, damages, liabilities, losses, fines and expenses, including, without limitation, court costs and attorney's fees, in any manner arising out of (i) any breach by MillerCoors of this Agreement; and (ii) any claim of MillerCoors' employees, staff, agents, contractors, third parties, vendors or subcontractors arising from or related to or connected with this Agreement, including, without limitation, any and all bodily injury, sickness, death or disease caused or arising from any act, error or omission on the part of MillerCoors, its agents, employees or subsidiaries in fulfilling MillerCoors' obligations under this Agreement, provided that the foregoing provisions shall not apply to, and MillerCoors shall not be required to indemnify or hold harmless the City or its directors, officers, employees or agents from any claims, damages, liabilities, losses, fines or expenses arising from or related to the City's inability to produce water for its customers on account a defect in or prohibitions against use by the City of MillerCoors' Prescriptive Pumping Rights leased to the City under the terms of this Agreement. 12.2 The City shall indemnify and hold harmless MillerCoors from any and all claims, damages, liabilities, losses, fines and expenses, including, without limitation, court costs and attorney's fees, in any manner arising out of (i) any breach by the City of this Agreement and (ii) any claim of the City's employees, staff, agents, contractors, third parties, vendors or subcontractors arising from, related to or connected with this Agreement, including without limitation any and all bodily injury, sickness, death or disease caused or arising from any act, error or omission on the part of the City, its employees, staff, agents, contractors, vendors or subcontractors in fulfilling the City's obligations under this Agreement. 13. Dispute Resolution and Arbitration 13.1 The Parties agree that any dispute arising in connection with the interpretation of this Agreement or the performance of any Party under this Agreement or otherwise relating to OHS West:260381265.8 8966-I A5S/MAA 13 0.55 this Agreement, whether arising before or after the expiration or earlier Termination of this Agreement, shall be treated in accordance with the procedures set forth in this Section 13.1 prior to the resort by any Party to arbitration or litigation in connection with such dispute. The dispute shall first be referred for resolution to the City and MillerCoors. Such procedure shall be invoked by either the City or MillerCoors presenting a Notice of Dispute identifying the issues in dispute. A telephone conference of the City's representative(s) and MillerCoors' representative(s), which each shall have authority to resolve the dispute, will be held within five (5) days after the delivery of the Notice of Dispute. 13.2 In the event that the telephone conference between the two representatives described in Section 13.1 does not resolve the dispute, either Party shall refer (i) any controversy, claim or dispute arising out of or relating to this Agreement or (ii) the breach, Termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this Agreement to arbitrate, to be determined by arbitration in Los Angeles, California, before three arbitrators, in accordance with the laws of the State of California for agreements made in and to be performed in California. Each of the Parties shall name one arbitrator. The third arbitrator shall be selected by the two named arbitrators from a list of the AAA's panel of commercial arbitrators under the procedures of the AAA. The arbitration shall be administered by the AAA pursuant to its Commercial Rules and Supplementary Procedures for Large, Complex Disputes. Judgment on the Award may be entered in any court having jurisdiction thereof. Arbitration of disputes relating to this Agreement, whether arising before or after expiration of this Agreement, shall be binding, final, not appealable, enforceable and in lieu of any right to sue or seek other arbitration in any court or tribunal. Without limitation of the foregoing, the Parties may, by written stipulation, agree to an alternative form of arbitration to that governed by the AAA's Commercial Rules, provided that, in the absence of such written stipulation, the provisions of this Section 13.2 preceding this sentence shall apply. 13.3 The Parties also agree that the AAA Optional Rules for Emergency Measures of Protection shall apply to the arbitration, without prejudice to the right of either Party, consistent with this Agreement, to seek from a court any interim or provisional relief that is necessary to protect the rights or property of that Party, pending the appointment of the arbitrators. The exclusive forum for such application shall be the Los Angeles County Superior Court or the United States District Court for the Central District of California. 13.4 The provisions of Code of Civil Procedure §1283.05 as well as any amendments or revisions thereto are incorporated into this Agreement. Depositions may be taken and discovery may be obtained in any arbitration under this agreement in accordance with the said statute or any amendment thereto. 13.5 Upon the request of any Party, a mediation shall be conducted prior to the arbitration and pursuant to the Mediation Rules of the AAA. 13.6 The arbitrator shall have no authority to award punitive or other damages not measured by the prevailing Party's actual damages and may not, in any event, make any ruling, find, or award that does not conform to the terms and conditions of this Agreement. It is hereby acknowledged and agreed that as a public agency, the City is not subject to punitive damages. OHS Wmt:260381265.8 8966-1 A5S(MAA 14 056 The arbitrator shall have no authority to award any relief that a court of the State of California could not award. 13.7 The Award shall be in writing and shall specify the factual and legal bases of the Award. The Award shall provide for payment by the non -prevailing Party of all arbitration costs and fees, including the reasonable attorneys' fees of the prevailing Party. 14. Miscellaneous Provisions 14.1 The Parties are entering into this Agreement with each other based in substantial part on the unique attributes that both Parties offer, in view of both Parties' location, resources, facilities, services and methods of operation. Therefore, this Agreement may not be assigned by either Party without the prior written consent of the other Party, provided however that any legal successor in interest (through merger, acquisition or otherwise) shall succeed to and be fully bound by this Agreement. 14.2 Each Party shall be excused from failing to perform its obligations under this Agreement during the continuance of an Event of Force Majeure, provided that such Party acts diligently to remedy the cause or effects of such Event of Force Majeure, if possible. Subject to the provisions of Section 9.4, if the affected Party is unable to remedy the circumstances described immediately above within thirty (30) days then this Agreement may be terminated at the written request of the non -affected Party. 14.3 Without limiting in any way the provisions of Section 13, in the event suit is brought to enforce or interpret any part of this Agreement or the rights or obligations of any Party to this Agreement, the prevailing Party shall be entitled to recover as an element of such Party's costs of suit, reasonable attorneys' fees. 14.4 Any waiver by either Party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. Any waiver must be in writing. Failure by either Party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive such Party of the right thereafter to insist upon strict adherence to that term or any other terms of this Agreement. 14..5 The determination that any provision of this Agreement is invalid or unenforceable shall not invalidate this Agreement, and this Agreement shall be construed and performed in all respects as if such invalid or unenforceable provisions were omitted insofar as the primary purpose of this Agreement is not frustrated. 14.6 This Agreement contains the entire understanding between the Parties relating to the subject matter herein contained and supersedes all prior oral and written understandings, arrangements and agreements between the Parties relating thereto. This Agreement may not be modified except in writing signed by both Parties. 14.7 This Agreement shall be governed by and interpreted in accordance with the Federal laws of the United States of America and with the laws of the State of California. Subject to and without limiting the effect of Section 13, the Los Angeles County Superior Court OHS Wen260381265.8 8966-1 A5S/MAA 15 057 or the United States District Court for the Central District of California shall have exclusive and mandatory jurisdiction over any and all controversies arising from, related to or connected with this Agreement, and all Parties hereby submit to such jurisdiction, and any and all proceedings involving such a controversy shall be brought in these courts, and not elsewhere. 14.8 The City agrees that time is of the essence in the performance by the City of its obligations under this Agreement. 14.9 The terms of this Agreement have been negotiated by the Parties hereto and the language used in this Agreement shall be deemed to be the language chosen by the Parties hereto to express their mutual intent. This Agreement shall be construed without regard to any presumption or rule requiring construction against the Party causing such instrument or any portion thereof to be drafted, or in favor of the Party receiving a particular benefit under this Agreement. 14.10 All notices, demands, requests or other communications relating to this Agreement shall be in writing and shall be sent via overnight delivery through a nationally recognized overnight delivery service, or, delivered or transmitted by hand delivery or telecopy (provided that a copy is also sent at the same time via U.S. Mail), addressed as follows: If to the City: City Clerk of the City of Azusa 213 East Foothill Blvd. Azusa, California 91702 Telephone: (626) 812-5229 Telecopy: (626) 812-5155 With copy to: Director of Utilities P.O. Box 9500 Azusa, CA 91702-9500 Telephone: (626) 825-5219 Telecopy: (626) 334-3163 If to MillerCoors LLC MillerCoors: Attn: General Counsel Post Office Box 4030 Mailstop NH320 Golden, Colorado 80401 Telephone: (303) 277-3002 Telecopy: (303) 277-6517 OHS West260381265.8 8966-1 A5S/MAA 16 058 With copy to: Michael A. McAndrews, Esq. Orrick, Herrington & Sutcliffe LLP 777 South Figueroa, Suite 3200 Los Angeles, California 90017 Telephone: (213) 612-2449 Telecopy: (213)612-2499 And a copy to: MillerCoors LLC Attn: Plant Manger 15801 East First Street Irwindale, California 91706-2089 Each Party's address may be changed by written notice to the other Party. Each notice, demand, request or other communication transmitted in the manner described above shall be deemed sufficiently given, served, sent and received for all purposes at such time as it is received by the addressee. 14.11 This Agreement shall amend and restate in its entirety, but not terminate, the Existing Agreement. This Agreement shall govern the rights and obligations of the Parties from and after the date of this Agreement, and the Existing Agreement shall govern such rights and obligations prior to the date of this Agreement. OHS West:260381265.8 8966-1 A5S/MAA 17 - IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written. "MILLERCOORS" "CITY" MillerCoors LLC, a Delaware limited liability company E Its: The City of Azusa, California, a California municipal corporation By: Its: City Manager APPROVED AS TO FORM By: City Attorney, City of Azusa OHS Ww:260381265.8 8966-I A5S/MAA 18 060 LIST OF EXHIBITS EXHIBIT A MillerCoors' Prescriptive Pumping Rights EXHIBIT B MillerCoors Lease EXHIBIT C Termination of the MillerCoors Lease EXHIBIT D Formula for Determining Permitted Rate EXHIBIT E Main San Gabriel Basin Description OHS Ww:260381265.8 8966-I A5S/MAA 19 061 CONSENT CALENDAR TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES DATE: FEBRUARY 23, 2009 SUBJECT: APPROVAL OFA BUDGET AMENDMENT FOR THE CANYON FILTRATION PLANT PROJECT FOR THE PURPOSE OF OBTAINING AN OPERATING PERMIT FOR THE EMERGENCY GENERATOR RECOMMENDATION It is recommended that the Utility Board/City Council: (a) approve staff's recommendation to continue to seek an operating permit for the Canyon filtration plant's emergency generator from the South Coast Air Quality Management District (SCAQMD); and (b) adopt attached resolution approving budget amendment in the amount of $500,000 in the Canyon filtration plant capital improvement budget to obtain the operating permit. It is further recommended that the Utility Board/City Council authorize the Director of Utilities or his designee to take all necessary actions to obtain the operating permit for the emergency generator as further described below. BACKGROUND The new Canyon water filtration plant is designed to have one megawatt emergency electric generator. Said emergency generator would provide continuity to the water treatment operation during power outages that may occur from time to time and specially during a disaster (an earthquake or a fire affecting the electric distribution line etc.). The emergency generator at the filtration plant is an internal combustion (IC) engine fueled with diesel oil. All IC engines in the SCAQMD area require an operating permit from the SCAQMD. SCAQMD can issue permits for IC engines only if air emissions resulting from IC engines are "offset" by emission reductions from other qualified equipment and/or processes, commonly 062 known as Emission Reduction Credits ("ERCs"). However historically, SCAQMD has issued operating permits for IC engines used for essential public services (water treatment is an essential public service) by relying on administratively created ERCs. Previously, applicants seeking permits for IC engines used in essential public services only needed to pay a fee in order to obtain an operating permit. However, a recent court decision nullified SCAQMD's ability to issue permit based on the administrative ERC system. As result of this court decision, on January 9, 2009 the SCAQMD issued a moratorium on the issuance of any operating permit unless the applicant can make a showing of the possession of non administrative created ERCs. The detailed description of court ruling and SCAQMD's moratorium is included in the attachment. The city's permit application is caught in this moratorium and the only way to proceed with the permit process is to buy ERCs in the open market. The best estimate of the cost of needed ERCs for our permit is approximately $500,000 at this time. Staff has considered the following options in light of this moratorium: Option 1: Temporarily forego the permitting of the emergency generator Pros: It will allow the new rules that SCAQMD is planning to develop to emerge, and if the rules turn out to be favorable then the cost of the permit may be much less than the estimated cost of ERCs at this time ($500,000). Cons: There is no assurance that SCAMQD will develop rules in a timely fashion (optimistic estimate is 12 months) and even if it does, there is no assurance that rules would not be further challenged in court nor would the cost under the new rules be any more favorable than the estimated cost of ERCs at this time ($500,000). In addition, the city would be exposed to water service interruptions if power outages were to occur in the meantime, potentially endangering public safety and firefighting capability. Option 2: Proceed with the permitting at this time Pros: It appears that ERCs are available at this time in the open market albeit very expensive. The permitting of the emergency generator still appears feasible despite of moratorium provided we are willing to spend the money Cons: It is costly and may be an inferior alternative if SCAQMD ultimately develops a less costly regulatory paradigm. Given the importance of water service reliability as well as public safety/firefighting considerations and the uncertainty associated with the SCAQMD's rulemaking process, staff recommends we proceed with Option 2, i.e., proceed with permitting at this time. Mitigation Strategy: It is likely that through modifications to the annual operating hours of the emergency operator, a lesser ERC requirement can be obtained and if so, the cost of permitting at this time will likely be less than the estimated cost of $500,000. Staff is proactively pursuing this possibility with it U.; SCAQMD. We are scheduling a meeting with the SCAQMD's staff to discuss mitigation strategies acceptable to SCAQMD in order to obtain the permit at a lesser cost. Use of Brokers to Find ERCs in the Open Market: Finding the cheapest available ERCs in the open market is no small feat as there are more than one hundred sources of ERCs, and not every owner of ERC is willing to sell the ERCs. Staff recommends the use of brokers for ERCs to find willing sellers for the city so that we can timely procure the needed ERCs. Brokers for ERCs will only get paid (typically 3.5% of the total transaction cost) if the brokering service is used and if a transaction is consummated. FISCAL IMPACT The fiscal impact of staff recommended option is estimated to be up to $500,000. Thus, if the Utility Board/City Council concurs with staffs recommendation then a budget amendment in the amount of $500,000 to account 32-80-000-000-7130/72107C-7130 is needed to implement it. Funding would either be provided from retained earnings or outstanding balance from the 2006 revenue bonds or some combination thereof. Prepared by: Bob Tang, Assistant Director Resource Management Chet Anderson, Assistant Director — Water Operations Cary Kalscheuer, Assistant to the Director of Utilities rim RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA, CALIFORNIA, AMENDING THE FISCAL YEAR 2008-2009 CAPITAL IMPROVEMENT PROGRAM BUDGET FOR THE WATER UTILITY TO AUTHORIZE APPROPRIATIONS NECESSARY TO OBTAIN PERMIT FROM SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT TO OPERATE DIESEL POWERED BACKUP GENERATOR AT WATER TREATMENT PLANT. WHEREAS, the City's water utility is in the final stages of building a water treatment plant; and WHEREAS, the water treatment plant requires a standby back-up generator to provide an alternative source of power in event of emergencies; and WHEREAS, diesel powered back-up generators require a permit from the South Coast Air Quality Management District; and WHEREAS, permits require that emission offsets be acquired known as emission reduction credits or "ERCs"; and WHEREAS, due to court rulings and rule moratoriums ERCs must be purchased on the open market and may cost as much as $500,000 in order for the water utility to obtain necessary permit for said back-up generator; and WHEREAS, Azusa Municipal Code Section 2-450 requires that all budget amendments between $100,000 and $1 million be approved by resolution; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF AZUSA, DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. That the City Council finds that it is necessary for the City to obtain a permit from the South Coast Air Quality Management District for the operation of a back-up generator at the water treatment plant. SECTION 2. That the Water Utility's Fiscal Year 2008-2009 Capital Improvement Program Budget account number 32-80-000-000-7130/72107C-7130 is hereby amended in the amount of $500,000 for the purpose of authorizing an appropriation necessary to obtain permit for operation of back-up generator. SECTION 3. The City Clerk shall certify to the adoption of this Resolution. 065 PASSED, APPROVED AND ADOPTED THIS 23rd day of February, 2009. Joseph Rocha, Mayor ATTEST: Vera Mendoza, City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Utility Board/City Council of the City of Azusa at a regular meeting of the Azusa Light & Water Utility Board on the 23rd day of Febraury, 2009. AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: Vera Mendoza, City Clerk South Coast Air Quality Management District 21865 Copley Drive, Diamond Bar, CA 91765-4178 (909) 396-2000 • www.agmd.gov Office of the Executive Officer 909.396.2100 January 9, 2009 TO: PERSONS INSTALLING .OR OPERATING EQUIPMENT THAT REQUIRES AN AQMD PERMIT Re: Moratorium on Issuance of Certain Air Permits This letter is to advise you that the South Coast Air Quality Management District (AQMD) is required to make significant changes to its permitting program as the result of a recent court ruling. This court decision may substantially affect your activities if you plan to install, construct, modify, replace or relocate equipment that emits air pollution. In addition, permits issued by the AQMD since September 8, 2006 may be affected by this court decision. For more detailed information please read the Fact Sheet attached to this letter. The Court Decision. Under federal and state law, AQMD can issue permits for new, replaced, relocated, or modified equipment only if emission increases are "offset" by emission reductions from other equipment. Emission offsets are generally provided by the permit applicant in the form of Emission Reduction Credits (ERCs). AQMD rules do, however, allow some types of facilities, such as essential public services, to obtain offsets from the District (Rule 1309.1, the "Priority Reserve"). AQMD rules also allow exemptions from the offset requirement for facilities with low emissions, or certain types of actions, such as equipment replacements or some relocations (Rule 1304). A recent court decision invalidated the AQMD rule specifying how the agency accounts for and calculates the amount of emission reductions available to fund the Priority Reserve and offset exemptions. Because of this decision, the AQMD cannot at this time issue Permits to Construct that rely on credits from the Rule 1309.1 Priority Reserve, or that rely on a Rule 1304 offset exemption. This situation will exist until the AQMD adopts a new rule or program that addresses the court decision. Next Steps. The AQMD plans to readopt the invalidated rule, or other appropriate program, as soon as possible. We expect this will take at least nine to twelve months. In the meantime, Permits to Construct can only be issued to applicants providing offsets in the form of ERC certificates that are owned by applicants or that are purchased from ERC holders in the open market. 067 Moratorium On Permits -2- January 9, 2009 The AQMD will continue to accept permit applications and will continue to process and issue permits for applicants that provide ERC certificates. To the extent, however, that a permit applicant relies on credits from the Rule 1309.1 Priority Reserve, or on a Rule 1304 exemption, the AQMD cannot issue a Permit to Construct at this time. Please be advised that any construction, installation, or operation of new, replaced, relocated, or modified equipment without first having obtained a Permit to Construct from AQMD is a violation of AQMD Rule 201 and is subject to a notice of violation and associated penalties and shutdown orders. We recognize that this situation could create substantial hardships for many facilities. My staff and I will do our utmost to minimize these hardships until this difficult situation is fully resolved. If you have any questions, please do not hesitate to contact Mohsen Nazemi, the agency's Deputy Executive Officer for Engineering and Compliance. He can be reached at 909-396-3447 or permitmoratorium@apmd.00v. Sincerely, Barry R. Wallerstein, D.Env. Executive Officer BRW:KRW:MN:vmr Attachment M AQMD's Permit Moratorium Fact Sheet January 9, 2009 Q: Why is there a moratorium on the South Coast Air Quality Management District (AQMD) issuing hundreds. of permits? A: As the result of a recent court ruling, AQMD is suspending operation of its internal bank of emission reduction credits (ERCs), also known as offset credits. Operation of the internal bank is needed for the AQMD to provide credits to permit applicants from the Rule 1309.1 Priority Reserve, and for AQMD to allow permit applicants exemptions from offset requirements specified in Rule 1304. No offset credits will be provided from the AQMD's internal bank at this time. Accordingly, AQMD will only be able to issue permits to sources that have provided their own offsets in the form of Emission Reduction Credit (ERC) certificates. Q: Who is affected by this action? A: All permit applicants intending to obtain credits for essential public services such as hospitals, schools, police stations, landfills or sewage treatment plants through AQMD Rule 1309.1 (Priority Reserve). Any facilities, regardless of size, intending to rely on any of the offset exemptions in AQMD Rule 1304 (Exemptions) are also affected. Examples are auto body shops, service stations, printers, local government and other medium and large businesses. Offset exemptions in Rule 1304 include sources with facility emissions less than four tons per year of any air pollutant, equipment replacements, facility and equipment relocations, facility modifications, and projects seeking to achieve regulatory compliance. Q: Are previously issued permits affected? A: Yes, thousands of previously issued permits are affected. The recent court ruling revoked AQMD Rule 1315 and required the agency to discontinue the use of offset credits issued from the AQMD internal bank for permits issued at least since Aug. 3, 2007. Certain aspects of the court ruling may suggest that the use of credits issued on or after Sept. 8, 2006 has been 0,69 invalidated as well. AQMD, however, has appealed the court ruling, which will stay the court's action to the extent that it would have required AQMD to cancel credits and revoke permits already issued since at least August 3, 2007. For this reason, until an appeal is concluded in AQMD's favor, or Rule 1315 or an equivalent replacement has been readopted and any litigation over the readopted rule has been concluded in AQMD's favor—none of which can be guaranteed – AQMD cannot ensure the long-term validity of permits issued on or after August 3, 2007, or possibly on or after September 8, 2006. Q: What has caused this action? A: This action results from a ruling by Los Angeles Superior Court Judge Ann I. Jones in a lawsuit (Case No. BS 110792) brought on August 31, 2007 against AQMD by the Natural Resources Defense Council, Communities for a Better Environment, Coalition for a Safe Environment, and California Communities Against Toxics. The lawsuit challenged the adoption of AQMD Rule 1315 (Federal New Source Review Tracking System) used for tracking the agency's internal credit bank and amendments to Rule 1309.1 (Priority Reserve), which also allowed power plants to access credits in the AQMD's internal credit bank. In her final ruling on Nov. 3, 2008, Judge Jones invalidated the rules and prohibited the agency from taking any action to implement Rule 1315 or the amendments to Rule 1309.1 until it has prepared a new environmental assessment under the California Environmental Quality Act (CEQA). Q: What has the AQMD done to address this situation? A: AQMD appealed Judge Jones' decision on Nov. 25, 2008. Although this appeal does not allow AQMD to issue any new permits, it puts a stay on canceling thousands of previously issued permits. In addition, AQMD intends to readopt a credit tracking rule or other appropriate program to replace Rule 1315. If the rule or program is adopted, credits will again be available for essential public services, innovative technology and research operations under Rule 1309.1 and for exempt sources under Rule 1304. 070 Q: How long will readoption of Rule 1315 take? A: At least nine to 12 months and possibly longer. Q: Does AQMD intend to readopt the power plant amendments to Rule 1309.1? A: The AQMD Governing Board has decided not to readopt the amendments to Rule 1309.1 allowing power plants to access credits from the Priority Reserve. Q: Can I purchase ERCs on the open market? A: Possibly, although they are scarce and in some cases very expensive, especially for PM 10 (particulate matter). The table below illustrates examples of estimated costs* of obtaining ERCs for typical equipment or operations: Type of Facility Estimated Cost of ERGs* Landfill (landfill gas/ renewable energy project with five turbines $140 million Sewage treatment plant (expansion with new digester and flare $3 million Food manufacturer tortilla chip fryer and oven $2 million Hospital boiler $2 million Auto body shop (Spray booth $500,000 Printer(printing press) $390,000 Gas station $255,000 Police station (emergency back-up generator) $110,000 *Based on average market price of ERCs in 2008. Individual ERC purchase prices may vary on a case-by-case basis. Q: Are there permitting actions not subject to the moratorium? A: Yes. The moratorium applies to permitting actions involving the AQMD's internal bank. The following permitting actions that do not involve AQMD's internal bank are not affected: • Permits for new, modified, replaced or relocated equipment where: o Applicants provide their own ERCs; 0.71 o Project maximum emission increases are less than 0.5 pound per day for all non - attainment air pollutants and precursors; o Existing permits have an equipment or facility -wide cap for VOCs and the proposed new, modified, or relocated equipment will not increase emissions beyond the cap; o The application is for air -pollution control equipment and no emission increases of any kind will occur; • Permits for Change of Operator; • Permits to operate where the equipment was issued a Permit to Construct before September 8, 2006 or the applicant did not rely on the provisions of Rule 1309.1 or Rule 1304; • Permits for equipment modification or change of conditions with no increase in emissions; • Initial Title V permits; • Title V permits for Administrative and Minor Permit Revisions; • Applications for Compliance Plans; and • Applications for ERCs. For additional information, please contact Mohsen Nazemi, Deputy Executive Officer for Engineering and Compliance. He can be reached at 909-396-3447 or permitm orato ri u m (a) ag m d. g ov. El 072 Subcontractor TSI onsite setting up WTP SCADA Chemical,Feed building factory reps in startup Potassium Permanganate system complete Membrane Building painting and finish work Membrane startup has begun - Siemens onsite - operator training on Membrane operation to begin in March Sewage lift station on line Pretreatment system operational Fire alar system and sprinklers operational Plant operators' in training JANUARY PROGRESS MONTHLY REPORT PAYMENT REQUEST: $287.606.39 TOTAL PAID TO DATE FEBRUARY, 2009 AMOUNT TO ESCROW $2,370,004.57 , PROJECT: MEMBRANE TREATMENT UPGRADE OF THE CANYON FILTRATION PLANT PROJECT NO.: WVF-207 GENERAL CONTRACTOR: SSC CONSTRUCTION INC. DESIGN ENGINEER: BLACK & VEATCH INC. CONSTRUCTION MANAGER: BLACK & VEATCH, INC. PROJECT CONTRACT AMOUNT: $35,905,500.00 $36,515,702.14 EXTRA DAYS CHANGE ORDERS TO DATE: $100,642.76 10 Approved July 23, 2007 $164,975.54 14 Approved Sept 24, 2007 $57,261.33 4 Approved Nov 26, 2007 $22,693.21 0 Approved Feb 25, 2008 $9,454.31 24 Approved July 28, 2008 $90,761.23 2 Approved Oct 27, 2008 $71,407.91 34 Approved Jan 26, 2009 $93,005.85 0 tent approv. Feb. 23, 2009 88 MONTHLY ACTIVITIES Construction progress meetings were held Jan 15, Jan 29, & Feb 12 Total CO's $610,202.14 As of 02/17/09 (1.70% over bid price) Subcontractor TSI onsite setting up WTP SCADA Chemical,Feed building factory reps in startup Potassium Permanganate system complete Membrane Building painting and finish work Membrane startup has begun - Siemens onsite - operator training on Membrane operation to begin in March Sewage lift station on line Pretreatment system operational Fire alar system and sprinklers operational Plant operators' in training JANUARY PROGRESS PAYMENT REQUEST: $287.606.39 TOTAL PAID TO DATE $34,021,896.30 AMOUNT TO ESCROW $2,370,004.57 PROJECT PERCENT COMPLETE 93.41% Q W usA a JJA INFORMATIONAL ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIESS DATE: FEBRUARY 23, 2009 SUBJECT: DELTA VISION COMMITTEE IMPLEMENTATION REPORT Attached for your information is a copy of the subject report. It is a work by a committee, the Governor's Blue Ribbon Task Force, comprised of stakeholders from broad base constituents — former legislators, farming community, urban water users, industry, high education institutions, scientists, and environmental community. It is a report with implementation plan that includes a well thought out schedule for all necessary activities. Delta is a vital water supply source for Azusa. As you are well aware, Azusa relies on Delta water for our replacement water; and Azusa, along with the- Cities of Sierra Madre, Monterey Park and Alhambra, voted to issue bonds to buy into the State Water Project forty plus years ago to enable the cities a reliable supply of water for their respective citizens. Today, this historically reliable resource has become a political and environmental football at the expense of California's economic well being. Attached report is a good informational resource if one of you plans to participate in the League of California Cities Water Task Force. Please let me know if you have any questions. Prepared by: J. Hsu 074 Delta Vision Committee Implementation Report Summary Recommendation to the Governor In its October 2008 Delta Vision Strategic Plan, the Governor's Blue Ribbon Task Force drew a fundamental and significant conclusion that California's Delta must be managed according to two coequal goals: "Restore the Delta ecosystem and create a more reliable water supply for California." The Delta Vision Committee agrees and recommends that this concept, as further defined herein, be incorporated into state law. In addition to the commendable accomplishment of achieving consensus on this level, the Task Force was able to take a highly politicized topic and distill rhetoric and diverse opinions and recommendations into a list of recommended actions. The Delta Vision Blue Ribbon Task Force's Strategic Plan is a robust document, developed through public input under the leadership of an accomplished team, that will serve as an important guide and reference as California moves forward to make improvements in the Delta. We agree with the Task Force that strong action is needed to stop the continued decline of water reliability and concurrent deterioration of the Delta ecosystem.. Based upon our review of the Strategic Plan document, we present here a concise summary of the Delta Vision Committee's recommended near-term actions necessary to achieve Delta sustainability and to avoid catastrophe. The priorities that form the foundation for a sustainable Delta include the following "fundamental actions": • A new system of dual water conveyance through and around the Delta to protect municipal, agricultural, environmental, and the other beneficial uses of water; • An investment commitment and strategy to restore and sustain a vibrant and diverse Delta ecosystem including the protection and enhancement of agricultural lands that are compatible with Plan goals; • Additional storage to allow greater system operational flexibility that will benefit water supplies for both humans and the environment and adapt to a changing climate; • An investment plan to protect and enhance unique and important characteristics of the Delta region; • A comprehensive Delta emergency preparedness strategy and a fully integrated Delta emergency response plan; • A plan to significantly improve and provide incentives for water conservation — through both wise use and reuse — in both urban and agricultural sectors throughout the state; • Strong incentives for local and regional efforts to make better use of new sources of water such as brackish water cleanup and seawater desalination; and • An improved governance system that has reliable funding, clear authority to determine priorities and strong performance measures to ensure accountability to the new governing doctrine of the Delta: operation for the coequal goals. Completion of December 31, 2008 - 1 075 this fundamental action is absolutely essential to the sustained operation and maintenance of all of these recommendations. The Delta ecosystem is experiencing a step decline. This condition, in addition to increasing seismic risk, added year-round water demand and the impacts of climate change have already caused severe reductions in the Delta -dependent water supply and in the reliability of that supply. These reductions impact our economy, our food security and our quality of fife. The stakes are high, and Californians must come together now to take fundamental actions to preserve and protect the many uses of the Delta. Context Governor Schwarzenegger has been committed to improving California's flood and water infrastructure since the day he took office. His support of Proposition 1 E resulted in the passage of the largest one-time investment in California's aging flood control system in the state's history. Additionally, his support for Proposition 84 led to unprecedented levels of funding dedicated to improving water quality and fundamentally investing in ecosystem protection and restoration. In an effort to overcome the historic political paralysis surrounding water policy in California, in September 2006 Governor Schwarzenegger signed Executive Order S-17-06. This Executive Order built on the Legislature's SS 1574, AB 1200 and AB 1803. The Executive Order launched the Delta Vision process by establishing a Blue Ribbon Task Force, a Cabinet -level Delta Vision Committee, Delta Science Advisors, and a Stakeholder Coordination Group. The independent Blue Ribbon Task Force was charged with developing both a long-term vision for the Delta and a plan to implement that vision. That same Executive Order charged a Committee of the Governor's Cabinet Secretaries, the Delta Vision Committee, to review the completed work of the Task Force and to make their own implementation recommendations to both the Governor and Legislature by December 31, 2008. This report sets forth those recommendations. The Committee, in this implementation report, draws on the detailed recommendations in the Task Force's Strategic Plan, and provides a summary of fundamental actions to be undertaken in the next two years. Many actions will take more than two years to complete but significant progress can be made within this time frame to ensure that infrastructure and planning improvements will be in place for the next Administration to carry on. Additionally, in this report the Committee lists a number of strategies set forth by the Task Force to support the fundamental actions. These are a significant part of a comprehensive approach, but require additional development and perhaps additional authority from the Legislature in order to implement. t There is no time to waste and we must accelerate implementation of near-term fundamental actions. Additional delay will only compound the risk to the state and its citizens. The Committee therefore recommends, as illustrated in the following timeline, the series of fundamental actions to be taken now and a phased implementation of most of the supporting strategies from the Delta Vision Strategic Plan as detailed herein. December 31, 2008 076 Timeline of Proposed Delta Actions and Associated Events 2009 Delta Vision Report to Governor and Legislature Governor's State of the State Executive Order creating Delta Policy Group Letter to Interior Secretary inviting participation in Delta Policy Group Delta Policy Group to meet at least quarterly to: • Develop Delta Governance Proposal (including recommendations for improvements in State agency management and efficiency) • Review and make recommendations to Governor and Legislature on key Delta actions. Track budgets and schedules to meet key milestones such as the Bay Delta Conservation Plan Environmental Impact Report/ Environmental Impact Statement (BDCP EIR/EIS) and interim actions • Develop Memorandum of Agreement (MOA) with Delta Counties to assist in developing Delta Plan • Develop Delta Plan Legislation proposed for: • Water Bond • Water Fees • Delta Conservancy • Enhanced administrative water rights authority for the State Water Resources Control Board (SWRCB) • Water Conservation Scoping meetings for BDCP EIR/EIS with stakeholders National Oceanic Atmospheric Administration Fisheries releases salmon Biological Opinion BDCP conservation strategies released BDCP Draft EIR/EIS 2010 Delta Policy Group continues to meet at least quarterly: • Recommends long-term governance for the Delta • Continues to track budgets and schedules to meet key multi -departmental actions • Continues MOA with Delta Counties to complete developing initial Delta Plan • Oversees Key Ecosystem Restoration Actions until Conservancy can assume role December 31, 2008 077 2010 (cont.) Legislation Proposed for: • Long-term governance for the Delta i • Enhanced Bay Delta Protection Commission Final BDCP EIR/EIS adopted and permits secured C Surface storage feasibility studies completed (Sites Reservoir, Los Vaqueros expansion, and San Joaquin River Basin) Department of Water Resources to apply for water rights for new point of diversion for Hood SWRCB to complete Suisun Marsh Plan SWRCB to Develop Water Recycling Plans Apply for Delta National Heritage area Develop Delta Economic Plan 2011 Goal: New Conveyance Breaking Ground Continue Ecosystem Restoration activities SWRCB to adopt water rights changes in accordance with the Delta Plan 2012 Conveyance procurement and construction continues Continue Associated Ecosystem Restoration actions Department of Fish and Game to recommend instream flows for the Delta SWRCB to revise San Joaquin River flow objectives.and implement as soon as possible to improve Delta water quality December 31, 2008 U%8 The Delta The Delta is formed by the confluence of the state's two largest rivers - the Sacramento flowing south and the San Joaquin flowing north - which carved the land, enriched its soil, and created a unique variety of habitats. Today, the Delta is one of California's most valuable and unique resources of this economically powerful and ecologically diverse state. The Delta provides valuable benefits to California: it is the source of drinking water for 25 million Californians, fuels a $37 billion agricultural industry and serves as an important habitat to more than 750 known animal and plant species. The 1,000 -square -mile estuary supports 80 percent of California's commercial salmon fisheries, and its 1,100 miles of levees protect farms, cities, schools and people. California's Delta has long been at the center of competing demands, both as the hub of the state's water system and the heart of the largest estuary on the Pack Coast. But it is much more than that: home to more than 500,000 residents, an agricultural center, a recreational draw from around the state, and a crossroads for many of California's utility and transportation corridors. Long-standing conflicts arising from these often competing uses are compounded by new scientific information suggesting increased risks to the Delta as we know it - from climate change which is causing both sea level rise extending into the Delta and the potential for increased flooding along Delta rivers. This new science also indicates the risk of major seismic events, potentially causing devastating impacts on public health, safety and welfare, is greater than previously understood. Change is Inevitable The water supply for two-thirds of Californians and much of the state's irrigated agriculture is held in jeopardy by the risks from floods, sea level rise and earthquakes as well as court decisions reducing exports of Delta water to central and southern California. Those risks have been increasing regularly - as the new science provides a new picture of the risks. Unbeknownst to many of the Californians who rely upon it, today's Delta landscape is a highly -altered human invention - a complex maze of 57 major "islands" carved by dredges for the purpose of land reclamation more than 100 years ago. Today, the Delta's land surface is as much as 30 feet below sea level, intersected by a network of shallow channels and sloughs. Since 1900, levee failures have flooded Delta islands 166 times; some of these flooded islands have never been recovered, while others have flooded multiple times. No Delta levee has failed as a result of a major earthquake; nonetheless, the risk of widespread damage from a major earthquake in the future is high. A 6.5 magnitude earthquake_ could cause multiple levee failures and the simultaneous flooding of several islands. The Delta ecosystem is becoming severely degraded. Court decisions, closure of the salmon fishery in 2008 and a procession of listings of species as threatened or endangered (winter -run Chinook salmon, Delta smelt, Central Valley spring -run Chinook salmon, and Longfin smelt) are evidence of this degradation. Climate change is altering the Delta and is expected to do so more in the future. Sea level rise of several inches in the past 100 years is expected to accelerate in the next decades December K, 2008 079 and the Delta Vision science advisors recommended using an expected sea level rise of 55 inches by 2100 in making major policy and infrastructure decisions. More variable precipitation and extreme weather will challenge the stability of Delta levees and increase the difficulty of achieving a reliable water supply. In addition, the Delta is rapidly becoming more urban. Despite the recent downturn in the housing market, millions more people are expected to inhabit the five Delta counties by the middle of this century. Wise land use decisions that preserve public safety, promote ecosystem restoration, and permit long-term climate change adaptation are essential. The Delta Ecosystem Must be Protected and Revitalized Fish population crashes are only the most recent manifestations of a long decline in ecosystem health. Several factors, including habitat destruction, invasive species, fish and productivity losses to water diversions, contaminants, and flow alterations have together gravely damaged the largest estuary on the West Coast of the United States. It is important to note that agriculture is part of the existing environment and sustaining long- term agricultural productivity through soil, water, and air conservation and protection is necessary to achieve both coequal goals. Large scale habitats must be restored and agricuftural landowners provided incentives for actions that integrate ecosystem restoration with their operations. Also, migratory corridors for birds, fish, and other animals must be established, fish populations must be protected and restored by addressing sources of mortality, and invasive species must be controlled. Several important actions are required as listed below. Additional resources need to be dedicated to carrying out many of these recommended actions. Recommended actions that have authorization • Complete the Bay Delta Conservation Plan (BDCP) and associated environmental assessments by the end of 2010. These actions provide for effective Delta ecosystem revitalization and strong recommendations designed to increase the quality of exported water, increase fish populations and protect water supplies against earthquakes and floods. • Update Bay -Delta regulatory flow and water quality standards to protect beneficial uses of water by 2012. Fully implement these new standards as well as the existing standards. Continue funding for implementation of the CALFED Ecosystem Restoration Program (ERP), including finalization of the ERP Conservation Strategy. Complete several ecosystem projects such as Dutch Slough, Mein's Landing and Hill Slough tidal restoration projects and improved habitat in the Yolo Bypass. Projects will proceed with due consideration and recognition of local jurisdiction and concerns, and implementation will be conducted in coordination with the affected parties. • Evaluate in 2009 and, begin construction on Delta gates and barriers that improve water quality, water supply reliability and ecosystem function. December 31, 2008 a '� Develop and implement streamflow recommendations throughout the annual hydrograph for tributaries to the Delta. Direct the Department of Fish and Game to develop streamflow recommendations for tributaries in the Delta watershed, as specified in Public Resources Code Section 10000`- 10005. Direct the State Water Resources Control Board to undertake appropriate proceedings to consider and implement the flows. ' Control aquatic invasive species within the Delta. Funding the Aquatic Invasives Management Plan developed by the Department of Fish and Game, a comprehensive effort to prevent new invasions and minimize impacts from established invaders, would aid the restoration of desirable habitat. The Department of Water Resources and the Department of Fish and Game, working in cooperation with federal and local Delta agencies, should implement this comprehensive invasive species management and control program. Implementation will require securing additional funds from the Legislature to strengthen and expand these programs. Require the state and regional water boards and the Department of Fish and Game to immediately expand their evaluation of potential stressors of the aquatic habitat and continue to adopt long-term programs to regulate discharges from irrigated agriculture and urban areas. Specific areas requiring attention are stormwater runoff from urban areas, agricultural drainage, and ammonium discharges from wastewater treatment plants. All of these alter water quality and sediment characteristics of the Delta. The effects of these inputs on aquatic foodwebs, algal blooms, and non- native species in the Delta require concerted study. This activity should be based on sound science and closely coordinated with the CALFED Science Program and a Science and Engineering Board, which will require financial support. In addition, by 2010 begin comprehensive monitoring of Delta water quality and fish and wildlife health, and by 2012 develop and implement Total Maximum Daily Load programs for the Delta and its tributary areas to eliminate water quality impairments, including but not limited to reduction of organic and inorganic mercury entering the Delta from tributary watersheds. Recommended actions requiring authorization: Large -Scale Habitat Restoration — Within the Delta Pian (described in the governance section), identify funding and direct restoration by 2100 of large areas — on the order of 100,000 acres — of interconnected habitats in coordination with flood control planning and implementation within the Delta and adjacent areas. These habitats should include tidal marshes, floodplains, open water, adjacent grasslands, seasonal wetlands, selected wildlife -friendly farmlands, and migratory corridors (both instream and riparian). Wildlife -friendly farming practices also should be encouraged. The habitats should be connected in ecologically beneficial ways, and lands adjacent to tidal marshes should be conserved in agricultural or open space uses to allow for long-term sea level rise. Flows and water quality conditions necessary to sustain the habitats must also be provided. Require the Resources Agency to_establish a task force of state, federal and local Delta agencies to integrate the Ecosystem Restoration Plan into the proposed Delta Plan. December 31, 2008 m a Reduce Effects of Non -Project In -Delta Diversions – In -Delta diversions have the potential to impact native fishes directly through entrainment and indirectly through effects on hydrology and the quality of return water flow. Secure additional funds from the Legislature by 2010 for the Department of Fish and Game to evaluate the effects of in -Delta diversions on native fishes and to make recommendations to minimize their effects while respecting their water rights. These evaluations should consider the costs and benefits of moving diversion points to locations where fish impacts are lower and water quality is higher. Proceedings should be initiated before the State Water Board to determine whether methods of diversion are reasonable based on the recommendation of the Department of Fish and Game. The State's Water Supply Must be More Reliable Twenty-five million Califomians—nearly two-thirds of the state's population—depend on the Delta for at least some of their water supply. Millions agricultural acres are irrigated with water from the Delta watershed. The survival of many endangered species also depends on flows through the Delta. Significant changes are occurring in the Delta—including sea level rise, climate change effects, levee deterioration, ecosystem degradation, and urbanization— that threaten the sustainability and reliability of the Delta. Actions must be implemented immediately to deal with these changes and ensure the sustainable future of California's water supply. The actions inherent to water supply reliability must include increased surface and groundwater storage, a reliable conveyance facility, increased utility of existing facilities, and assurances to counties and watershed of origin that their priority to water resources shall be protected. Additional resources need to be dedicated to carrying out many of these recommended actions. Recommended actions with authorization: Near -Term Water Conveyance Improvements – Complete the Bay Delta Conservation Plan (BDCP) and associated environmental assessments by the end of 2010. Completion of these actions would ensure that Delta water exports comply with state and federal species protection laws and water quality standards. These actions would also lead to strong recommendations for water conveyance improvements designed to increase the quality of in -Delta and exported water, increase fish populations and protect water supplies against earthquakes and floods. Water Use Reductions – Initiate the Governors objective to reduce per capita water usage 20 percent by 2020. To achieve this objective, all currently available authority should be used, in particular using the incentive of grants to insure compliance. Additionally, legislative action should be taken as outlined below. Surface Storage Investigations – Complete analyses of CALFED surface storage feasibility studies and their environmental assessments by December 2010. As called for in SBX2 1, each feasibility study will identify the preferred reservoir location and size, project appurtenances, operations under climate change conditions, cost, and benefits. The studies should also describe how the storage projects could contribute to the coequal goals of restoring the Delta ecosystem and creating a reliable water supply for California. December 31, 2008 082 Water Bond — Continue to work with the Legislature to place a comprehensive water bond package on the next statewide ballot so that critical regional and state infrastructure and ecosystem restoration projects can move forward. Financial and Technical Assistance — Immediately provide financial incentives and technical assistance through the Integrated Regional Water Management Plans and Local Groundwater Assistance Program to improve surface and groundwater monitoring and data management. Recommended actions requiring authorization: Long -Term Water Conveyance Improvements — In 2011, implement conveyance improvements and associated ecosystem restoration projects upon the completion of the BDCP evaluations now under way. While conveyance by itself does not require funding or changes in authority, any public share of costs for the BDCP ecosystem restoration objectives may require additional funding authorization. Conservation Improvements - Enact legislation in 2010 requiring urban water suppliers or regions to reduce their per capita water use sufficiently to achieve a statewide average 20 percent reduction in per capita water use by 2020. This effort should take into account regional differences and find ways to improve agricultural efficiency as well as urban water use efficiency. The first priority should be on incentive -based approaches; however, the State Water Resources Control Board's relevant authority should be streamlined. This will facilitate fair, timely and effective enforcement action and the assessment of monetary penalties for failure of water suppliers and users to achieve conservation targets and implement best management practices. Enact legislation to require urban and agricultural water agencies to adopt volumetric water pricing and expand outreach and information programs. In particular, it is essential that any conservation mandates include sufficient flexibility to avoid unintended consequences such as impacts on low income communities, groundwater recharge, regional differences, and agronomic needs (e.g. salt management, climatic variations). Additionally, improving agricultural efficiencies is not intended to result in a proscriptive mandate for each crop. Expand Surface and Groundwater Storage - Complete analyses of surface storage, groundwater storage, flood control, and improved reservoir operations by 2012 and implement feasible and effective projects. Provide financial incentives to promote local and regional water storage projects in conjunction with the CALFED surface storage project feasibility studies and their environmental assessments, described previously. Water Rights Accountability — Enact legislation in 2010 to enhance and expand the State Water Resources Control Board's water rights administrative accountability. These recommendations are not intended to adversely affect the current water right priority system, including area -of -origin priorities but rather to strengthen the current administrative system. Appropriate enforcement will protect existing water rights. ➢ The State Water Resources Control Board needs authority to collect and disseminate accurate information on all surface water diversions in the state. Consequently, all statutory exemptions from water diversion and use reporting should be repealed and enforcement authority extended, and a December 31. 7008 1 streamlined process implemented requiring complete, timely, and accurate information from all diverters. The gathering and submittal of this information should be as easy as possible, as described below. D The Water Board needs authority to require interim remedies, after r opportunity for hearing, to prevent irreparable harm to the environment and other water right holders, while underlying proceedings continue. Interim remedies could include requiring the diverter to take appropriate action to mitigate potential harm or to provide necessary information. As with courts, Water Board evidentiary proceedings can take many years. Unlike courts, however, the Water Board currently has no authority to issue interim orders designed to prevent irreparable harm. D Further, the Water Board needs to clarify existing water rights in many parts of the State in light of poorly defined or unreported riparian and appropriative water right claims and the unquantified needs of fish and wildlife. The Board needs the authority to initiate stream adjudications and collect adjudication costs from the parties diverting water. This process will respect area of origin rights. D Many existing water right permit terms and conditions are not directly enforceable, and the law should be amended to correct this problem. Water Use Reporting - Ensure the sustainability of water supplies by improving water diversion and use reporting, strengthening water rights accountability, and increasing water use efficiency. Enact legislation to streamline and simplify water diversion and use reporting requirements to reduce the reporting burden on local agencies and improve the quantity and quality of water diversion and use data. The legislation should mandate electronic submission of water diversion and use data to a central database. In addition, a pilot project should be mandated to install real-time telemetered monitoring devices on surface water diversions in and tributary to the Delta. The pilot project should be extended to all diversions above a specified size upon successful completion of the pilot. Integrated Regional Water Management — Continue to improve water supply reliability by encouraging regional self-sufficiency, promoting alternative supplies, and by increasing local and regional water storage capacity. Provide financial incentives to promote alternative supplies such as reused water, recycled water, stormwater, and desalinated water. Provide financial incentives and technical assistance through the Integrated Regional Water Management Plans and Local Groundwater Assistance Program to improve surface and groundwater monitoring and data management. The Delta is a Unique and Valued Place Despite the risks and inevitable changes, the Delta is a unique and important region for both the state and the nation. Investing in the sustainability of the Delta is critical for its character, its agriculture and recreation, the Delta ecosystem and statewide water supplies. The people, assets, and resources of the Delta are subject to substantial and increasing risks. The Delta levee system is critical to protecting the entire landscape, the state's water system, and the Delta ecosystem, but it is deteriorating. Delta levees provide marginal protection under present conditions and face growing threats from sea level rise, earthquakes, and floods. Land use decisions and emergency preparedness efforts must December 31, 2008 R account for these realities. Placing more people in risky locations — and failing to safeguard those who are already there — is irresponsible. Action is necessary to ensure people remain out of harm's way. Additional resources need to be dedicated to carrying out many of the recommended actions below. Recommended Actions that have authorization: Improve Flood Protection and Emergency Response – Immediately increase emergency preparedness and response in the Delta by continuing to stockpile flood response materials. Complete by 2010 a Delta -wide regional emergency response plan that achieves legally binding regional coordination between local, state, and federal agencies, and by carrying out near-term emergency preparation actions such as those recommended in the Delta Vision Strategic Plan. In addition, use existing bond funds to quickly acquire easements or fee title to lands needed to form a south Delta flood bypass. Strengthen the Delta levee system – Continue to fund and implement levee improvement projects especially in urban areas, while also expanding the levee special projects and subvention programs until a long-term levee strategy is formulated. Require the California Public Utilities Commission and the California Department of Transportation to conduct by 2012 a comprehensive analysis of the costs and benefits of various infrastructure protection strategies, including those identified in the Delta Risk Management Strategy. Create a Delta National Heritage Area – By 2010, achieve federal designation for portions of the Delta as a National Heritage Area and expand the State Recreation Area network in the Delta. Direct the Defta Protection Commission, with support from the Department of Parks and Recreation, to apply for federal designation for all or portions of the Delta as a National Heritage Area, a place designated by Congress "where natural, cultural, and recreational resources combine to form a cohesive, nationally -distinctive landscape arising from patterns of human activity shaped by geography." Develop a Delta Economic Plan - Direct the Secretary of Business, Transportation and Housing and Secretary for Food and Agriculture to work with Delta counties and the Delta Protection Commission to develop a Delta regional economic plan by 2011 to support increased investment in agriculture, recreation, tourism, and other resilient land uses. As part of the informational baseline for this plan, conduct a Delta -wide agricultural analysis to identify opportunities, needs and barriers to agricultural sustainability in the Delta. Direct the Secretary of Business, Transportation and Housing to initiate, by March 1, 2009, a focused and coordinated effort, working together with local governments, the Delta Protection Commission and businesses in the Delta, to identify projects and programs, including those relating to agriculture, recreation, and tourism, that have the potential to quickly improve the economic vitality of the Delta, focusing on optimum leverage of federal, state, local and private sector resources to address critical economic needs. The results of this effort shall be included in the Delta Plan described in the governance section. December 31, 2008 11 MR Recommended Actions Requiring authorization: Establish a Delta Investment Fund - Establish by 2010 a Delta Investment Fund to provide a credit base for a more broad-based and resilient Delta economy. Structure the fund to accept federal, state, local and private funding, ultimately achieving a base of $50 to $100 million, to ensure long-term stability. Once created, the fund should be placed under the joint management of the Delta Protection Commission and a consortium of local governments to ensure that it is used for the benefit of local economies. Expenditures of funds should be consistent with the Delta Plan described in the governance section. Plan for Appropriate Land Uses for At -Risk Areas in the Delta — Seek legislation in 2009 that would require local land use plans for (1) the Cosumnes/Mokelumne floodway and the San Joaquin/South Delta lowlands, (2) urbanized areas below sea level on Bethel and Brannan -Andrus Islands, and (3) certain towns within the Delta primary zone, including Walnut Grove, Locke, Clarksburg, Courtland, and Terminous. These are locations within both the primary and secondary zones where public safety, flood management, ecosystem restoration, and/or climate change adaptation needs require greater land use oversight. The local plans should be created by local governments, but must be consistent with the Delta Plan described in the governance section. Long-term Levee Planning. Prepare a comprehensive long-term levee investment strategy by 2012 that matches the level of protection provided by Delta levees to the uses of land and water enabled by those levees. Direct the Department of Water Resources to develop the plan in coordination with local reclamation districts and other relevant state agencies and provide funding to support their participation. The levee plan must include full consideration of the levees' role in protecting people, land, reliable water supplies, water quality, aquatic ecosystems, infrastructure, the aesthetic and cultural values of the Delta, and the capacity for the Delta to evolve over the long term. It must also consider the effects on restoration of the Delta ecosystem, potential threats posed by climate change, seismicity, subsidence, localized deterioration, and any possible "domino effect" resulting from individual levee failures. Strengthen Delta Governance & Provide Reliable Funding State, federal, and local interests are inextricably intertwined in the Delta, and a successful coalition of these interests is critical to the success of improvements in water supply reliability, ecosystem health and protection of the Delta as a place. As stated in the Executive Order that established the Delta Vision process, effective governance and stable, sufficient funding are absolute requirements for successfully addressing the challenges in the Delta. For two decades, a governance structure that allows for effective coordination and policy direction has proven elusive. The California Bay - Delta Authority, created as a mix of state and federal agency and public members in 2003, has been judged in several independent reviews to have been largely ineffective. Its failure has been largely attributed to a lack of statutory authority to enforce priorities and an inability to direct policy through a budgetary approval process. December 31, 2008 12 The Delta Vision Blue Ribbon Task Force recommended an independent Council that would be responsible for adopting a California Delta Ecosystem and Water Plan, and would have the statutory authority and budgetary control to ensure compliance by state, regional and local agencies. The Council would seek to ensure such compliance by federal agencies through provisions of the Coastal Zone Management Act. This approach is both sweeping in its scope and innovative in its method. However, the breadth of the proposal, combined with as yet undeveloped standards and criteria creates significant concerns worthy of consideration. Specifically, it is not yet clear how the coequal goals would be balanced and achieved under this new structure. Achievement of goals for the Delta has eluded existing governing entities for decades. But simple articulation of the coequal goals is unlikely to help resolve conflict without a clear set of standards and criteria for the Council to apply when making consistency determinations for proposed agency actions. In the absence of standards and criteria, it will be difficult to achieve predictability for those decisions. An example of the type of approval actions that need predictability, and thus standards and criteria, is proposed pumping regimes for Delta exports. For example, how much may be pumped at what hour and at what rate and how is that pumping regime to be modified when conditions change? Furthermore, would those changes override decisions by the Department of Fish and Game or the federal fishery agencies? Many questions of similar significance remain unanswered. In the above example, standards and criteria are necessary to determine whether the agency guidance to the operators of the water projects is consistent with the coequal goals. Development of those standards and criteria involves legal and technical issues of enormous complexity. Therefore it would be most appropriate to do so in the context of a public process, similar to that of the Task Force, before a long-term governance proposal is ready to be submitted to the Legislature. While the public process will be complex and contested, it is necessary. The governance recommendation of the Task Force is innovative and has merit; however, many additional issues must be clarified and questions answered before we can recommend implementation. That said, there are both immediate and short-term governance actions that should be taken and we make the following recommendations: Recommended actions that have authorization: • Complete the Central Valley Plan of Flood Protection, a building block for land use decisions in the Delta. • Continue existing CALFED programs which articulate state and federal activities. • Continue a strong and consistent investment in science and engineering important to the Delta through a robust, well -coordinated Delta Science and Engineering Program with transparent oversight and review from a Delta Science and Engineering Board. Recommended actions requiring authorization: Establish the Interim Delta Policy Group - composed of the Secretary for Resources; Secretary for Food and Agriculture; Secretary for Business, Transportation and Housing; Secretary for Environmental Protection; President of the Public Utilities Commission; Director of the Department of Water Resources; Director of the Department of Fish & Game; Executive Director of the State Water Resources December 31, 2008 13 Wr Control Board and an elected official chosen by the five Delta counties. Request the federal government to participate in the policy group at the highest appropriate level. This group is intended to be in place for 12 months and until a long-term governance structure is in place. The recommended immediate goals for the Policy Group: 1) Propose to the Governor a long-term governance plan that will ensure that the coequal goals are achieved in a coordinated manner among state, federal and local agencies. Development of the governance plan should include existing and potential new fee authorities necessary to achieve the coequal goals. An example of this might be to modify and revitalize the California Water Commission and give it changed authority. The Califomia Transportation Commission might be an example of how this revised water commission could work. 2) Provide oversight for implementation of Delta actions until a long -tens governance mechanism is in place. 3) Develop a Memorandum of Agreement with the counties of Contra Costa, Sacramento, San Joaquin, Soiano and Yolo and three Councils of Governments (Sacramento, Bay Area and San Joaquin) that will advise the Policy Group on Delta implications of their governance proposals and Delta Plan. 4) Develop a Delta plan that addresses in an integrated way the long term Ecosystem Restoration Plan, flood protection, infrastructure and local issues and concerns until a long-term governance mechanism is established. Make recommendations for how best to make the Delta Plan enforceable through statute. 5) Evaluate how best to place the coequal goals into state statute. This should include clear standards for interpretation and application of the coequal goals. Those standards and the coequal goals of a vital Delta ecosystem and more water supply reliability for California should be the foundation of policy making and management of Delta resources, consistent with California water rights law, and federal and state laws that protect water quality, endangered species, and other beneficial uses of water. The statute should also require that the coequal goals are included in any contract or financing instrument, such as a bond, related to Delta resources. Enhance the Delta Protection Commission - The existing Delta Protection Commission (DPC) should be modified to focus its efforts in the areas of land use and economic development. The Committee recommends that the Delta Protection Commissioners include: five county supervisors, one from each Delta County selected by its Board of Supervisors, three representatives of Delta cities, selected by Councils of Governments, and three representatives of Delta Reclamation Districts or water agencies. Consistent with the recommendation of the Task Force, the DPC may invite state and federal agencies to participate as non voting members. The Delta Protection Commission will ensure that all projects in the Delta are consistent with the plan. The changes to the Delta Protection Commission should take place only upon implementation of an overall governance structure to be developed by the Delta Policy Group. Establish a Delta Conservancy - Given the scope, urgency and need for effective integration among multiple ecosystem restoration efforts, the Committee recommends the establishment of a Delta Conservancy. Until such legislation is December 31, 2008 14 enacted, Delta ecosystem restoration projects will continue to be implemented by the Department of Fish and Game, the Department of Water Resources and other responsible agencies. Actions taken by the Conservancy shall be consistent with the Delta Plan. The Conservancy shall have the following responsibilities, attributes and powers: Responsibilities: • Develop a strategic plan to coordinate and/or implement ecosystem restoration activities consistent with the Delta Plan. • Bring necessary lands under management consistent with its ecosystem restoration activities, through easement, leases, acquisition or other means. • Support appropriate recreation and economic development activities in the Delta, including those of the National Heritage Area designation. Attributes: • A new entity focused on the statutory Delta, the Suisun Marsh and the Delta watershed as addressed in the Delta Plan. • Governed by nine members, including the Resources Secretary, Director of Finance, Chair of the Delta Protection Commission, and six public members, at least three of whom shall be elected county officials from within the five Delta -region counties. Powers: • To enter into contracts, to buy and sell land and other property and the power to acquire land through the State Public Works Board. • To apply for, receive and expend grants or contracts from local, state or federal agencies, non profit or business organizations. • To engage in partnerships with any organization to support implementation of its programs. Implement Strategic Financing for Delta Sustainability - The Committee supports the recommendations made regarding strategic finance by the Task Force. The Committee recommends immediate legislative action to provide authority to implement state water supply and environmental resource protection fees. We recommend that fees be tailored to specific purposes where fee payers can see the specific work products associated with fees. The Policy Group and long term governing body or implementing agencies should have authority to impose these fees in specific circumstances when necessary and when consistent with the law and the Delta Plan. The authority to set fees and the responsibility for allocation of the proceeds are consistent with legislative authorization and oversight. Revenue bond authority should be associated with fee authority. Bond financing will also be a critical element of a financing plan and the Delta Vision Committee urges quick action on pending bond proposals which include funds for ecosystem restoration, Integrated Regional Water Management, storage, Delta revitalization, water recycling, conservation and water quality improvements. December 31, 2008 15 HN F This table lists the Goals and Strategies from the Delta Vision Blue Ribbon Task Force's Strategic Plan and identifies where they are addressed in the Delta Vision Committee's report. The Committee accepted all the recommended goals proposed by the Task Force. They also accepted all recommended strategies with the exception of two strategies regarding govemance, for which they proposed modifications. It is expected that the interim governing entity will continue to evaluate and direct specific actions. :C oaifsand Strategies fi "Delta ,Decision -110 �_Location in Delta Vision Committee Vi5Task lForm'Srilimple Implementation nT Yes N 0 jrnp lementationReporE, Report Plan for Appropriate Land Uses for At - Goal 1: Legally acknowledge the co -equal X Page 1: Summary Recommendation to the goals of restoring the Delta ecosystem and Governor creating a more reliable water supply for and infrastructure strategies of Goal 6. Califforriia ------ -- - ------- ------------ . .... .. Strategy 11.11: Make the co -equal goals the X Page 14: Evaluate how best to place the coequal foundation of Delta and water policy goals into state statute making. Strategy 3.11: Restore large areas of X ... ........ Large -Scale Habitat Restoration Goal 2: Recognize and enhance the unique X Page 10: The Delta is a Unique and Valued cultural, recreational, and agricultural values Place of the California Delta as an evolving place, an action critical to achieving the co -equal goals Strategy 2.1: Apply for federal designation X of the Delta as a National Hentage Area, and expand the State Recreation Area network in the Delta. Strategy 2.2: Establish market incentives X and infrastructure to protect, refocus, and enhance the economic and public values of Delta agriculture. Strategy 2.1 Develop a regional economic X plan to support increased investment in agriculture, recreation, tourism, and other resilient land uses. ....- ...... Strategy 2.4: Establish a Delta Investment X Fund to provide funds for regional economic : Page 11: Create a Delta National Heritage Area Page 11: Develop a Delta Economic Plan , -- - - . .. ... .... . .. . . .. .. Page 12: Establish a Delta Investment Fund development and adaptation. -- ---- -- ---- - - ---- Strategy 2.5: Adopt land use policies that X Page 12: Plan for Appropriate Land Uses for At - enhance the Defta's unique values, and that i Risk Areas in the Delta are compatible with the public safety, levee, and infrastructure strategies of Goal 6. ------ -- - ------- Goal 3: Restore the Delta ecosystem as the X Page 6: The Delta Ecosystem Must be heart of a healthy estuary .............. ...... . . . Protected and Revitalized ----- -- .... ....... Strategy 3.11: Restore large areas of X Page 7: Large -Scale Habitat Restoration interconnected habftats--on the order of 100,000 acres—within the Delta and Its watershed by 2100. Strategy 3.2: Establish migratory corridors X Paged Large -Scale Habitat Restoration for fish, birds, and other animals along selected Delta river channels. . .......... ..... ------ December 31, 2008 III Goal 4: Promote statewide water X conservation, efficiency, and sustainable use Strategy 4.1: Reduce urban, residential X industrial, and agricultural water demand through improved water use efficiency and conservation, starting by achieving a statewide 20 percent per capita reduction in i water use by 2020. Strategy 4.2: Increase reliability through diverse regional water supply portfolios. Pages 6 and 7: Several actions to reduce stressors Page 7: Develop and implement streamilow recommendations Page 7: Require relevant state agencies to I immediately expand evaluation of potential stressors. ---------- _.. _.... Page 8: Water Use Reductions Page 9: Conservation Improvements X Page 9: Financial and Technical Assistance Page 10: Integrated Regional Water Management Goal 5: Build facilities to improve the existing X water conveyance system and expand statewide storage, and operate Strategy 51: Expand options for water X conveyance, storage, and improved reservoir operations. Strategy 5.2: Integrate Central Valley flood X management with water supply planning. Goal 6: Reduce risks to people, property, and X state interests in the Delta by effective emergency preparedness, appropriate land uses, and strategic levee investments Strategy 6.1: Significantly improve levels of X emergency protection for people, assets, and resources. — --- ._...... ------ Strategy 6.2. Discourage inappropriate land X uses in the Delta region. Page 8: Surface Storage Investigators Page 9: Long -Tenn Water Conveyance Improvements; Expand Surface and Groundwater Storage Page 11: Improve Flood protection and Emergency Response; Strengthen the Delta Levee System I..... ... Page 12 Plan for Appropriate Land Uses for At - Risk Areas in the Delta Strategy 6.3: Prepare a comprehensive j X Page 12: Long -Tern Levee Planning long-term levee investment strategy that matches the level of protection provided by Delta levees and the uses of land and water enabled by those levees. December 31, 2008 17 091 1 Goal 7: Establish a new governance structure x with the authority, responsibility, accountability, science support, and secure funding to achieve these goals - ------- ----- ..... . I ................. Strategy 7.1: Establish a new California Delta Ecosystem and Water Council as a policy making, planning, regulatory, and oversight body. Abolish the existing Calff(Dmia Bay -Delta Authority, transferring needed CALIFED programs to the Califorma Delta Ecosystem and Water Council. Establish a new Delta Conservancy to implement ecosystem restoration projects, and increase the powers of the existing Delta Protection Commission. Page 12 -13: Strengthen Delta Governance & Provide Reliable Funding Page 13: Establish the Interim Delta Policy Group, rather than a Council Strategy 7.2: Require the California Delta X Page 14: The interim Policy Group is to start Ecosystem and Water Council to prepare a developing a Delta Plan in coordination with California Delta Ecosystem and Water Plan local government to ensure sustained focus and enforceability among state, federal, and local entities. .. . .... ...... Strategy 7.3: Finance the activities called X Page 15: Implement Strategic Financing for for in the California Delta Ecosystem and Delta Sustainability Water Plan from multiple sources. L....... ... . ... ...... ... .... Strategy 7.4: Optimize use of the CALFED X Record of Decision and Coastal Zone Management Act to maximize participation of federal agencies in implementation of the Pages 12 -13: Consider issues that must be clarified before proceeding with recommendation. California Delta Ecosystem and Water Plan. ---------- -- Near-Term Actions 1. Obtain needed information on water X .. ............ .. . . ....... ..... ... ------- Page 10: Water Use Reporting diversion and use. 2. Initiate collection of improved socio- X economic, ecosystem, and physical structure data about the Dela to inform policy processes and project level decision making by all public agencies, local, state, and federal. -------------------- _- ------ ____ ....... .. ...... . • 3. Accelerate completion of in -stream flow X Page 7: Develop and implement streamflow, analyses for the Delta watershed by the recommendations. Department of Fish and Game. ------- — ----- I --------- -------------------- 4. Conduct a Middle River Comdor Two X Page 6: Evaluate in 2009 and begin Barrier pilot project. construction of Delta gates and barriers that improve water quality, water supply reliability and ecosystem function. -------- December 31, 2008 18 092 C 5. Complete construction of an alternative X intake for the Contra Costa Water District, 6. Evaluate the effectiveness of a Three X Mile Slough Bamer project. ----- --- -------------- .......... —.—I -- ------- -7- 7, Construct a demonstration fish protection screen at Clifton Court Forebay. -------- - - ---------- 8. Advance near-term ecosystem x restoration opportunities, - ---------- --------- ----------- 9. Stockpile rock and other emergency x response materials. 10. Assess and improve state capacity to respond to catastrophic events in the Delta. ....... . Page 6: Evaluate in 2009 and begin construction of Delta gates and barriers that improve water quality, water supply reliability and ecosystem function. ------- -- -- — Not considered. Page 11: Improve Flood Protection and Emergency Response Page 11: Improve Flood Protection and Emergency Response December 31, 2008 19 b 3. ANusA LANI 6 5A INFORMATIONAL ITEM TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD AND AZUSA CITY COUNCIL FROM: JOSEPH F. HSU, DIRECTOR OF UTILITIES DATE: FEBRUARY 23, 2009 SUBJECT: LEGISLATIVE UPDATE At both the Federal and State levels, most legislators have been consumed by economic and budgetary issues and legislation. Our affiliate associations, the American Public Power Association (APPA), the California Municipal Utilities Association (CMUA), and Southern California Public Power Authority (SCPPA), are monitoring utility -related legislative issues and trying to keep pace with the rapidly changing legislative environment. At the Federal level, the President signed the Stimulus legislation on February 17, 2009. APPA and SCPPA were monitoring various drafts of the Stimulus package and looking at how such legislation might affect utilities. In general, there are various provisions in the Stimulus legislation that will provide funding for various water projects and those related to renewable energy, smart grids, energy efficiency, transmission, and battery technologies. While funding will likely be prioritized based on how fast the money can be spent and how many jobs the funding creates, it is not clear what channels will be used to distribute such funding and what strings will be attached to using the funds. At the State level, the budget crisis has dominated the legislative landscape and little time has been left for consideration of much else. In fact, the CMUA reported that legislators will be limited in how many bills they can introduce this session due to the need to focus on financial and budgetary issues. As a result, very few legislative positions have been adopted by the CMUA's legislative committee. The CMUA, however, has formulated principles regarding proposed Renewable Portfolio Standard legislation and these are attached for your reference. When it comes to regulating Greenhouse Gases at the Federal level, it has been reported there is some debate as to whether the Federal government should adopt RPS standards. Some legislators have suggested that it might be better if they were to adopt air standards instead of setting an RPS target. The Sacramento Municipal Utility District (SMUD) formulated some interesting ideas regarding Federal legislation on climate change and that document is attached for your reference. 094 In the area of water, there is still perception that water resources and the drought are of serious concern regionally. See attached letter from Congressman Devin Nunes to President Barack Obama and Governor Arnold Schwarzenegger. In this letter, the Congressman highlights how the drought and environmental regulations could cost California 40,000 farm worker jobs and exponentially more jobs in Southern California if the area is unable to get its traditional water supply from the State Water Project (SWP). State legislature committees began to conduct hearings on various subjects from the Delta Vision Report, a copy of which is attached with this agenda. The Delta will be the main focus of the state legislature in dealing with water in this and possible next legislative sessions. Without a resolution to the Delta there will be perpetual water shortage both to central valley farming communities and to southern California; and the long term economic effects will be devastating. Prepared by: Cary Kalscheuer, Assistant to the Director of Utilities Attachments: CMUA — Principles for Proposed RPS Legislation CMUA RPS Prindples.pdf SMUD — Proposal for Low Carbon Electricity Framework T1 SMUo-LowCarbon.pd f Letter from Congressman Devin Nunes, 2151 District 1M\. Ltr re Wtr Crisis. pdf 095 I LIFORNIA MUNICIPAL UTILITIES ASSOCIATION 915 L STREET, SUITE 1460 • SACRAMENTO, CALIFORNIA 95814 • (916) 326-5800 • FAX (916) 326-5810 California Municipal Utilities Association Principles For Proposed Renewable Portfolio Standard Legislation CMUA supports a 33% Renewable Portfolio Standard goal by 2020 as necessary tool to meet the State's paramount objective of reducing greenhouse gas (GHG) emissions to 1990 levels by 2020. 2. CMUA supports the development of a renewable energy baseline for individual publicly owned utilities (POUs) by the POU's governing board using a method similar to that used to develop a baseline for individual Investor.Owned utilities (IOUs). 3. CMUA supports a common definition for eligible renewable resources and a common tracking system applicable to all entities. The parties also support granting the California Energy Commission (CEC) authority to certify new or additional future technology advances that meet the Legislative intent of the RPS Program, 4. Existing law limits the eligibility of renewable energy to small facilities of 30 MW or less of generating capacity. CMUA supports increasing the limit to 50 MW. This is consistent with existing laws in Oregon and Washington. 5. CMUA supports continued local flexibility with regard to setting procurement targets to meet the 33% RPS by 2020.CMUA supports requiring POUs to establish periodic renewable energy procurement targets of renewable energy that demonstrate material progress toward meeting the RPS of 33% in 2020. CMUA believes the CEC should play a review and verification role, where the CEC tracks and measures progress. POUs and IOUs would report their procurement targets and their progress in meeting those targets on an annual basis to the CEC. CMUA supports the development of a common reporting format and protocol by the CEC. POUs would also be required to periodically update their procurement targets to reflect actual progress in procuring renewable energy, the lumpiness of procurement, and the barriers impacting procurement efforts. The "RPS resource report" would be subject to review and comment by the CEC. The provisions of this reporting requirement are exclusive and should supersede and remove any existing reporting requirement regardinc the acquisition of renewables. e S. CMUA supports removal of barriers to new transmission, including streamlining the siting of new transmission lines and facilitating cost effective infrastructure projects that meet both reliability needs and RPS targets. New transmission projects should allow for joint ownership and operation of facilities, including recognition of long term physical transmission rights and cost certainty. CMUA supports maintaining the current jurisdiction of publicly owned utilities (POUs) with regard to planning, approval, siting and construction of new or upgraded transmission lines. 7. CMUA supports continued local POU governance approval of individual renewable energy procurement processes and contracts. Such contracting authority must remain with the respective rate -making authority. 8. CMUA supports the use of renewable resources throughout the Western Electric Coordinating Council (WECC) and generally supports either utility ownership or long-term contracts as the primary procurement strategy to encourage renewable resource development. Procurement strategies for renewable resources should be guided by the availability of transmission capability, maintenance of grid reliability and lowest cost to consumers. Existing law limits the eligibility of out-of-state renewable resources to facilities that commenced operations beginning in 2005, with certain exceptions. The ambitious 33% RPS goal necessitates procurement of cost-effective resources wherever they can be found and be deliverable to California. CMUA supports deleting the restriction on pre -2005; out-of- state renewables resources to enlarge the pool of resources from which IOUs/POUs can obtain clean and reliable supplies of electricity at the lowest cost to consumers (see Pub. Res. Code §25741(b)(2)(B)(ii)). CMUA supports the ability to use tradable renewable energy credits (RECs) as an additional compliance tool to enable procurement of renewable energy despite certain transmission and other constraints. CMUA supports legislation to clarify that the GHG reduction attribute of the REC counts against any GHG emissions liability from energy re -bundled with the REC and delivered to California. While it should not be mandatory for individual utility compliance, CMUA supports the preference and prioritization of in-state renewable manufacturing and development to create jobs and drive economic development. 1/2812009 097 10. CMUA recognizes that CARB is relying on a 33% RPS to achieve the GHG reductions required under AB 32 and recognizes that CARB intends to levy penalties to utilities not achieving the GHG reduction goals. No further penalty authority is required in RPS legislation POUs will have ample incentive to increase their renewable energy procurement in order to reduce the financial risk of purchasing expensive carbon allowances. Such costs would act as a financial penalty to POUs that fail to meet RPS goals. Additional penalties would siphon off resources needed to procure renewables and would serve to harm ratepayers who must ultimately pay for them through increased rates. CMUA supports the opportunity to purchase RECs directly to meet the RPS target. 11. CMUA supports an exemption, limited to smaller POUs who are largely resourced by electricity from large hydro generation projects, from the RPS procurement target. Consideration should also be given to categorically exempting very small utilities based upon the number of customers served or the megawatt hours served, and for an exemption process at the Energy Commission for utilities with unusual circumstances. 12. CMUA supports the development of local Renewable Energy Development Areas to encourage the research, development and manufacturing of renewable energy technology within California. 1/2812009 MW WSMUD I i SACRAMENTO MUNICIPAL UTILITY DISTRICT 7 rl The Power To Do More.' P.O. Box 158.30, Sacramento, CA 95852-1830,- 1 -588 -742 -SMUT) (7683) January 30, 2009 GM09-021 Dear Colleagues: As the 111'" Congress gets under way, and we again debate on federal climate change legislation and a federal Renewable Portfolio, 1 would like to share SMUD's thoughts about a new approach to a greenhouse gas (GHG) cap -and -trade program that we believe is more customer -focused and cost- effective than proposals we have seen to date. SMUD believes that a single, integrated federal cap -and -trade program, that places the "point of regulation" at the Retail Provider and allows — but does not mandate —those entities to use a range of tools, including renewable resources, energy efficiency, demand response and other measures, would . achieve our long-range carbon reduction goals while ensuring continued delivery of affordable, reliable and clean energy to our customers. Given our country's current economic reality, electricity consumers cannot afford to have billions of dollars siphoned away through multiple energy resource mandates and an overly expensive cap -and -trade program. SMUD's proposal, which we call the "Low Carbon Electricity Framework," (LCEF) has three critical cost -savings elements: I ) By placing the point of regulation at the Retail Provider, windfall profits to generators are eliminated; 2) Energy efficiency, the lowest -cost carbon reduction option, is embedded as a compliance option in the LCEF, which gives regions with fewer renewable resources than others a cost-effective means to achieve required GHG reductions; and 3) By allocating allowances to Retail providers, which are regulated by state or local authorities, the value of those allowances will minimize cost impacts to consumers, instead of flowing to other regions or programs outside the community. Attached are two documents that explain our LCEF proposal in more detail. My colleagues at SMUD and I hope you will take time to review them and give us your thoughts and reactions to this proposal. I am aware that many in Congress and elsewhere have endorsed the idea of a stand-alone Renewable Portfolio Standard and a complex GHG cap -and -trade program with generators as the point of regulation. Nevertheless, 1 hope that as the debate on these ideas becomes more focused, Members of Congress may seek a more affordable, customer -focused alternative and that the LCEF may find a receptive audience. I look forward to discussing this proposal with you at our next scheduled meeting. Thank you again for your consideration. Sincerely,(/n/' - I C10 � Jo DiStasio General Manager & Chief Executive Officer John DiStasio, General Manager & Chief Executive Officer DISTRICT HEADQUARTERS ^ 6201 S Street, Sacramento CA 95817-1899 099 SMUD Proposal For a Low Carbon Electricity Framework (February 2009) SMUD recognizes the serious threats of global climate change and the imperative of reducing greenhouse gas emissions drastically. As a customer-owmed utility, we have a responsibility to protect our customer's long-term interests, in terms of minimizing exposure to climate change, as well as their short-term interests of ensuring continued delivery of affordable, reliable, and clean electricity. To this end, SMUD supports long term carbon reduction goals that are consistent with minimizing climate impacts, specifically, an 80 — 90% reduction in emissions by 2050, and a near-term reduction target that at reduces emissions by 15% below today's levels by 2020. s As a primary means to protect electricity customers from excessive and unnecessary costs in achieving these targets, we are proposing a framework that recognizes the pivotal role that electricity retail providers can and should play in reducing carbon emissions from the US' largest emitting sector. • SMUD supports a Low Carbon Electricity Framework (LCEF) that would require electricity Retail Providers to take primary responsibility for reducing electric sector greenhouse gas (GHG) emissions through a customer -oriented cap -and -trade program. • SMUD prefers a single, federal cap -and -trade program over "piecemeal," multiple and/or overlapping federal mandates on greenhouse gases (GHGs), renewable resources and energy efficiency/conservation to ensure reductions are made in a cost-effective and efficient manner. The "point of regulation" for the LCEF would be the Retail Provider of electricity, because these entities are in the best position to plan and make resource choices for a low -carbon electricity infrastructure that ensures reliability, least cost compliance, and economic development through creation of local green }obs. A Retail Provider has more tools at hand than an electricity generator to reduce emissions from the electricity sector. • Under an LCEF, Retail Providers would have theflexibility to meet a nationally mandated emissions reduction target with local, cost-effective tools of their choice. These tools would include energy efficiency, new renewable generation, zero-GHG generation, carbon capture offsets, and emissions trading. By embedding energy efficiency as a compliance option, this In December, 2008, SMUD's Board adopted a target of 90% below 1990 emissions levels by 2050, and a 33% RPS standard by 2020, in support of reducing carbon emissions and ensuring a sustainable energy portfolio. 100 approach would ensure that the most cost-effective means of reducing emissions is not an after -thought, but a centerpiece of meeting our national GHG reduction goals. SMUD supports an allocation system for the electricity sector that distributes all emissions allowances to retail providers for a fixed but gradually increasing fee, with all resulting revenues returned to Retail Providers to be spent on infrastructure and programs that actually reduce carbon, mitigate the price effects of a GHG cap on consumers, and are subject to approval by state and local regulators. Such a system provides cost certainty to retail providers and their customers, and needed revenues to finance the transition to a low -carbon economy. As any cap and trade program will take several years to implement, "early action" should be encouraged by rewarding Retail Providers for carbon -reduction programs established by a specified date. In addition, electrification of the transportation sector will be one of the most effective ways to reduce societal GHG emissions and American dependence on foreign oil. To ensure that this approach is aggressively pursued, allowances in an amount that reflects the reduction in emission due to deployment of plug-in hybrid vehicle (PHEVs) and electric vehicles (EVs) should be transferred from the transportation sector to the electricity sector as the market share of these vehicles increases. 101 Low Carbon Electricity Framework Frequently Asked Questions (FAQs) 1. What is the goal of the Low Carbon Electricity Framework (LCEF) and what are its advantages? The overarching goal of the LCEF is to achieve necessary greenhouse gas (GHG) reductions by the electricity sector in the most efficient, cost-effective manner, with particular concern for the impact of the program on consumers and the U.S. economy.. A key advantage of the LCEF is that, by designating electricity Retail Providers as the "point of regulation," responsibility for reducing GHG emissions is placed on the entity that is: 1) accountable to the public through direct regulatory oversight; 2) obligated to serve the customer reliably; 3) responsible for investing in new utility resources and/or driving generation investment decisions through contracting to purchase power to serve load; 4) responsible for investing in energy efficiency and demand response; and 5) closest to consumers and, therefore, most able to incent changes in their behavior, while protecting them from unnecessary costs. Proposals that would make emitting generators the point of regulation ignore the fact that generators that are not also retail providers are not in a position to influence decisions about investments in alternative, lower -emitting resources. Neither are they able to implement customer -focused energy efficiency or demand response programs. When independent generators or wholesale generators that are forced to comply do not have viable alternatives other than shutting down generation or losing money, they will stop generating. Further, in deregulated electricity markets, placing the point of regulation at the generator will unnecessarily result in billions of dollars in windfall profits to generators as the result of higher market clearing prices, regardless of the allowance allocation scheme. Placing the point of regulation at the Retail Provider would still provide an appropriate price signal, in the form of a risk "adder", but would save consumers significant amounts of money by ensuring that no more is paid for compliance than necessary. This is a fundamental difference between the LCEF and the more commonly proposed generator- ' Experience in the EU-ETS has shown that free allocation in a deregulated market results in massive windfalls to generators. Further, economic modeling by the California Public Utilities Commission shows that even under a 100% auction approach, with a point of regulation at the generator, California's electricity customers would spend more than Sl Billion per year extra for electricity as a result of higher market clearing prices, without reducing emissions. 102 based cap -and -trade program, and its importance for minimizing costs to the consumer should not be overlooked. By eliminating multiple mandates on the electricity sector, the LCEF would result in a simpler, more cost-effective carbon reduction program. Separate mandates for carbon reduction, development of renewable resources and energy efficiency will likely create redundant, inconsistent and/or conflicting requirements for utilities, resulting in greater costs to industrial, commercial and residential customers. By placing the point of regulation at the Retail Provider, separate mandates are unnecessary, because renewable resources and energy efficiency automatically become compliance tools for meeting carbon reduction targets placed on the utilities. Retail Providers have the necessary flexibility to develop compliance strategies which take maximum advantage of regionally available resources, energy efficiency and demand response opportunities. A point of regulation that can effectively utilize energy efficiency as a compliance approach will have maximum benefits to the consumer and the economy 2, and will ensure broad acceptance of efficiency programs throughout the electric sector. Given the current economy and the pressure that customers are already facing, priority should be given to achieving our national GHG goals at the lowest possible cost to consumers and to the U.S. economy. 2. How would Retail Provider emissions levels be determined? Historic emissions? Other? Determining a Retail Provider's emissions levels would begin by building on existing databases and forms Retail Providers and generators use for reporting emissions and electricity transaction data. In addition, a new tracking system would be required to integrate these data sources, as well as some additional reporting requirements, in order to accurately attribute emissions to Retail Providers. This enhanced system would be consistent with the philosophy behind voluntary emissions reporting programs such as the California Climate Action Registry Power Utility Reporting Protocol and The Climate Registry's Electric Power Sector Reporting Protocol. In addition, it would allow for much more robust identification of emissions associated with electricity transactions and regional residual mix values. While the tracking system would require funding to put in place, its costs pale in comparison to the increased societal costs of a generator -based point of regulation. Although the generator -based point of regulation would be easier from a tracking perspective, it unnecessarily increases wholesale electricity prices for all generators, leading to higher prices for those fuels and for energy -intensive goods and services. a As has been shown in California, "California has saved about $56 billion in electricity costs and created 1.5 million jobs over 35 years by using energy more efficiently" according to a UC Berkeley study published in 2008 'Energy Efficiency, innovation, and Job Creation in California," 103 R. 3. Why are emissions allocated at a fixed cost as opposed to an auction? Because Retail Providers are regulated entities, allowances could be distributed at not cost with a stipulation that they be used in their customers' interests. However, because raising revenue will be necessaryto pay for new, non -emitting infrastructure, the LCEF proposes that allowances be distributed for a fixed, but gradually increasing fee. Such an approach provides some of the same advantages of an auction but minimizes uncertainty around costs to customers and total amounts of revenue generation, thereby helping contain costs and minimize inefficiencies in expenditures. An auction unnecessarily creates uncertainty in total costs to retail customers as well as uncertainty for administration of funds, resulting in large surpluses and deficits for programs and infrastructure that rely on these funds. In addition, given the nation's recent experience with oil, gas, and financial markets volatility and uncertainty, introducing and relying on a large, new, and potentially volatile market does not seem to be an appropriate way to ensure that capital -intensive clean infrastructure gets built. 4. What would "clean" Retail Providers, those with little or no fossil energy to sell, get in terms of allowances? What if they needed allowances for future purchases, generation? Emissions allowances would be distributed, initially, primarily on the basis of historic emissions, allowing those entities with higher emissions profiles time to transition to lower -emitting resources. A transition to allocations based on retail electricity sales would occur by 2030 at the latest, recognizing that all Retail Providers, including those with lower emissions profiles, will have to make investments in clean generation, transmission, customer efficiency and rate mitigation. Recent utility investment decisions, made with the express intent of reducing greenhouse gas emissions, would be rewarded through an early action set-aside. Such a transition period also allows utilities time to pay off existing capital investments to ensure customers are not left with major stranded assets as a result of the program. 5.1 Would any other entity (other than Retail Providers) get allocations of allowances? If not, how would we generate S$ for energy efficiency, customer assistance and other worthy programs? Since the point of regulation and, thus, the point of allowance allocation would be the Retail Provider, these entities would likely invest in more energy efficiency because it is the most cost-effective compliance strategy. This mechanism would provide both the incentive and the value for utilities to implement successful customer efficiency programs as a direct compliance approach. For those states where energy efficiency programs are run by the state or by independent entities, mechanisms could be set up to allow transfer of value by the Retail Provider to the energy efficiency program. However, this decision would occur at the state level, 101 rather than as part of the federal allocation program, given the diversity of structures and purposes for state-run or independent energy efficiency programs. 6. How does the LCEF compare to the recently proposed EEI Climate Change Points of Agreement? The biggest point of agreement between the EEI principles and SMUD's LCEF principles has to do with the recognition of the Retail Provider, or the Local Distribution Company (LDC) as the most appropriate place to allocate allowances to ensure appropriate regulatory oversight of use of funds and maximum benefits to customers. The long term targets proposed by EEI are also comparable to those proposed by SMUD, i.e. an 80% reduction in emissions by 2050. SMUD fully agrees that efficiency and renewables are key to near-term reductions, but believes they will also play a significant role in long-term reductions, along with other existing and emerging technologies. While the EEI principles focus on a cap -and -trade program which initially allocates allowances for free, primarily to Retail Providers and, to a lesser extent, to merchant coal generators, and gradually transitions to a'full auction, the LCEF would require allowances to be paid for, and provide that Retail Providers would have the right to purchase these allowances a fixed price. Rather than establishing a price "collar", as proposed by EEI, the LCEF would establish a price floor, and allowances would be distributed to those entities that need them, which would implicitly limit speculative bidding and price spikes. 7. What role would flexible compliance mechanisms, such as offsets, have in the LCEF? Flexible compliance mechanisms such as high-quality offsets have a role to play in reducing societal emissions, while limiting the pressure on high capital cost infrastructure to change rapidly in response to fluctuations in carbon prices. However, excessive reliance on offsets can have a detrimental effect as necessary infrastructure investments are delayed in favor of projects which, while worthy, may have little benefit to local, state, and the overall US economy. Offsets should be viewed primarily as a cost mitigation tool to smooth out carbon prices, not as a fundamental strategy for achieving the long-term deep cuts needed in electric sector emissions. Other flexible compliance,mechanisms such as "banking" should be included as well to encourage early reductions. However flexible compliance mechanisms which compromise the integrity of the cap and the imperative of emissions reductions over the long term should be avoided. DEVIN NUNES 1013 LONO WORTH HOUSE OMM BUILDING 21s Dlrrmcr, CALUVRNIA WA9iM=N,DC2D515 (202) 2)5-2523 )MMI11'EIS ON WAYS AND MEANS 113 NonT CmuRGN 5'134DR Sul>E 205 31/RCOMMITIILS VISALIA, CA 93291 HewTx (559) 733-3561 T"m UNITED STATES — 264 CLows AvuNuD HOUSE OF REPRESENTATIVES Sul=2D6 COMIOMEE ON BUDGET CLows, CA 93612 (559)323-5255 ASSISTANT REPUBLICAN WHIP www.NBN0333oUSL• Dov February 6, 2009 The Honorable Barack Obama The Honorable Arnold Schwarzenegger President of the United States Governor, State of California 1600 Pennsylvania Ave, NW State Capitol Building Washington, DC 20502 Sacramento, CA 95814 Dear President Obama and Governor Schwarzenegger: The State of California is experiencing a disaster. The economy of the state is dependent on two major water supply projects that were designed and built in middle of the Twentieth Century, the Central Valley Project (CVP) and the State Water Project (SWP). Collectively, these projects serve more than 25 million people in the San Francisco Bay Area and Southern California and serve more than three million acres of highly productive farmland. However, we have failed to invest in the infrastructure required to make these Projects capable of serving the current needs of the state. Moreover, our failure to invest in conveyance infrastructure in the Sacramento -San Joaquin Rivers Delta has subjected the CVP and SWP to severe restrictions under the Endangered Species Act. As a consequence, the people who rely on the CVP and SWP are facing unprecedented water supply shortages at the hands of policymakers. For the first time in the history of the CVP, which is operated by the Bureau of Reclamation, agricultural water service contractors on the westside of the San Joaquin Valley will receive no water for the irrigation of nearly a million acres of farmland. As a consequence, as much as 500,000 acres will be forced out of production and, according to a recent forecast by economists at the University of California, Davis, more than 40,000 farm workers will lose their jobs. This is a number which exceeds the number of emnlovees of General Motors Moreover, these job losses will occur in poor, rural communities, such as the City of Mendota, which already has unemployment rates in excess of 40%, and these communities arc the least capable of reacting to this economic devastation. This year the SWP, which is operated by the California Department of Water Resources, will be able to deliver only 5-10% of normal allocations to cities and farms served by the SWP. The economic losses in places like the Los Angeles basin and Silicon Valley, which rely on water from the SWP, will be exponentially greater than losses in the farming communities of the San Joaquin Valley, and the consequences of this water supply disaster will eviscerate any benefits from a stimulus package passed by the Congress. I am writing to urge you to act immediately to ameliorate the economic disruption that is already occurring in California. There are actions that can be taken. For instance, New Melones 10,6 Reservoir, which is owned by the Bureau of Reclamation, currently holds nearly 1.2 million acre-feet of water. Historically, water from this reservoir has been used primarily to enhance fisheries in the Stanislaus River. However, current needs demand that this water be made available to farmers and cities outside of the historic place of use, and it is within the discretion of your agencies to enable this change. In addition, agencies within your respective administrations exercise great discretion in the administration of federal laws, like the Endangered Species Act and the Central Valley Project Improvement Act; or state laws, like the California Water Code. These agencies should be directed to exercise that discretion in a manner that will enable the CVP and the SWP to move water to the farms and cities that depend on these projects. I implore each of you to direct agencies under your control to take all stens necessary to restore water supplies to some sense of normalcy. Finally, I am asking that you join me in supporting legislation that will prevent environmental laws from impeding progress on stimulus projects and actions required to deal with emergencies like the one currently facing California. Senator David Vitter has proposed an amendment to the stimulus bill that would exempt from the application of the National Environmental Policy Act for a period of three years projects intended to stimulate the economy and exempt from the application of the Endangered Species Act actions taken during periods of a declared emergency to mitigate the impacts of that emergency. I will introduce companion legislation in the House of Representatives at the earliest opportunity. Please support Senator Vitter's proposed amendment and my legislation. As you know, the San Joaquin Valley is America's breadbasket. Our region supplies food and fiber to the world. Communities in the San Joaquin Valley grew on the foundation of a strong agriculture economy, but today many of those communities are withering because of chronic water supply shortages. I do not believe that I am exaggerating when I state that people in rural areas of the San Joaquin Valley are facing a humanitarian crisis unparalleled in modern history. Moreover, large urban areas of California are about to experience the hardship endured by these ural communities for the last two decades. While you cannot reverse decades of bad decisions overnight, you do have options before you today. I urge you to exercise leadership and act now to mitigate the suffering of my constituents. Failure to act will simply push the San Joaquin Valley unemployment rate above 20% and result in the collapse of civil society. With deep concerns; llawle4 Peunes Member of Congress CC: Speaker Nancy Pelosi; Interior Secretary Ken Salazar; California Secretary for Natural Resources Mike Chrisman; Senator Dianne Feinstein; Senator Barbara Boxer 107 �j AZUSA LIGHT & WATER For Quality of Ufe Bus, Shelter Advertisement Reusable Grocery Bags Sharps Mail Back Containers Foothill/Dalton --1 I�Www C, k'"Nqw AWN 9 Is) M 0 (9"1 -,i v, 41 jj (9"1 -,i First Street/Azusa ____—_Azusa/Arrow- Highway- ---