Gray skies hung over Monterey’s Colton Hall as officials announced a proposed water purchase agreement and settlement for the regional desalination project.

With backing from most Peninsula mayors and at least two county supervisors, Monterey County Water Resources Agency General Manager Curtis Weeks focused on the bright side: A 10-million-gallon-per-day desalination plant north of Marina would end illegal overpumping of the Carmel River, relieve pressure on the Seaside Basin, stave off severe water cutbacks and create a drought-resistant flow to the Monterey Peninsula.

Supervisor Dave Potter said the state water board’s cease-and-desist order against California American Water, on hold under appeal, “hangs over this community like the Sword of Damocles. We cannot afford to have that implemented.” He praised the broad collaboration backing the agreement, including Cal Am, the county, Marina Coast Water District, Monterey Peninsula Water Management District and Surfrider Foundation.

But the California Public Utilities Commission’s Division of Ratepayer Advocates, which advocates for Cal Am’s ratepayers, is not among them. DRA feels the project is too expensive, lacks cost controls and puts nearly all the financial burden on Peninsula ratepayers, while Marina Coast customers pay next to nothing for the same desalinated water. Cal Am ratepayers would have no voice on the management of the desal plant they’d be paying for.

“We worked really hard to try to make this a workable agreement for the ratepayers of the Monterey Peninsula,” says DRA Water Policy Supervisor Diana Brooks. “At the end of the day, we just couldn’t sign on. We continue to support a regional desalination proposal that is fair and equitably priced, but we don’t think this agreement meets that standard.”

Under the agreement, Marina Coast would own and operate the desal plant. The county would run the beach wells supplying it, and Cal Am would buy and distribute the water it produces. About 85 percent of that de-salted water would flow through a 10-mile pipeline to the Peninsula. But the Peninsula district would have no decision-making authority on the project, only a seat on the advisory committee.

Weeks estimates the project cost at $280 million to $390 million – steep, he concedes, but 20 percent lower than the other two alternatives. He hopes low-interest public financing and grants will help keep the costs down. Peninsula water rates would likely double, he says.

But the DRA calculates the total project cost at more like $450 million, including debt interest. “This is exceptionally high for a desalination plant of this size,” Brooks says. “We’re going to investigate that further.”

A law forbidding the export of Salinas Valley groundwater introduces another complication. Officials estimate the county’s beach wells would draw about 15 percent freshwater along with the seawater, and that ratio is expected to grow over time. If 15 percent of the intake water is fresh, Marina Coast (which includes the mouth of Salinas Valley) gets to use 15 percent of the plant’s desalinated water. But Marina Coast would only pay its current groundwater production cost: less than $150 per acre-foot.

The desalinated water, by contrast, is expected to cost at least $3,000 per acre-foot (DRA puts the price as high as $5,000). That means Cal Am customers may be looking at water rates 20-33 times those of their Marina neighbors.

Brooks thinks Marina Coast should pony up project costs proportionate to its share of the desal water. “That’s water for them,” she says. “We feel that they should pay their fair share.”

But Weeks says it’s appropriate for the Peninsula to bear the cost: “The people who are benefiting from the project need to be paying for it.”

Potter downplays the Peninsula rate increase. He expects monthly water bills around $80-$90 for a family of four in 2014 – “probably not much more than someone who has a good cable package.” The higher cost will inspire conservation, he adds: “The cost of water’s been pretty low for years. It’s just like gas: As soon as it got expensive, people started using less.”

Darby Fuerst, the Peninsula district’s general manager, says he’s concerned about the fairness issues but backs the agreement anyway. “Marina Coast customers could pay for a small fraction of a plant they’ll end up owning,” he says, noting the long-term Marina Coast contribution is capped at $22 million. “On the other hand, is there another alternative to comply with Cal Am’s needs under Order 95-10 [to reduce Carmel River diversions] and the Seaside Basin adjudication restrictions?”

The project includes several environmental incentives. Carmel River habitat, including steelhead spawning grounds, would benefit from less Cal Am pumping. The desal plant would intake water from beach wells rather than the open ocean pipes that kill marine life, and discharge diluted brine into the sea from an existing Monterey Regional Water Pollution Control Agency outfall pipe. Weeks claims the project could even have a negative carbon footprint: Methane gas from the regional landfill would power the neighboring desal plant.

The agreement still has to pass through a series of hoops before its proponents can move forward. The Board of Supervisors and Marina Coast will consider it next week for April 7 submission to the Public Utilities Commission.

PUC hearings are scheduled May 10-14. The administrative law judge will likely weigh in by late June, and the PUC is expected to make a final call on the agreement by the end of the year.

Read more Weekly coverage of the regional water project, including an exclusive report on a March 26 closed-door mayors’ breakfast, at www.mcweekly.com/rwp.