Municipal Water District*

R1

MWDOC and OCWD should assemble and finance a strong inter-agency (OCWD, MWDOC, and select retailers) advocacy group to drive the final permitting and construction of several large scale seawater desalination plants with the objective of significantly accelerating the process and shortening project schedules. (F.1. through F.6.), (F.10.) The recommendation has not yet been implemented OCWD is working on a financing analysis of the Poseidon Project which will provide useful information by September 17, 2014. A Water Reliability Study is being started in Orange County by MWDOC at this time and should have preliminary information available beginning in January 2015, which will help with upcoming decisions on the Poseidon Project. MWDOC, OCWD and the retailers have been working on the Poseidon Huntington Beach Project which is in the last stage of permitting. Following the permitting phase, the project will be evaluated for implementation; we believe this will occur no later than the first half of 2015 calendar year. At that time, a decision whether to proceed with implementation of the project will occur. We also believe a decision will be made in the next few years with respect to the Doheny desalination project moving forward with a permitting decision several years away. Proceeding with a number of ocean desalination projects will require successful permitting working in conjunction with State Water Resources Control Board and Coastal Commission. MWDOC is currently working with Association of California Water Agencies, State Water Resources Control Board, CalDesal and other organizations to expedite and resolve intake and brine discharge issues. We believe the San Diego County Water Authority Ocean Desalination Projects within Camp Pendleton will take longer to mature to a point of decision-making. This could take a number of years. Previous analyses have indicated additional conceptual costs of approximately $500 per AF to be added to the cost of the San Diego projects to account for the cost of conveying this water back into Orange County. Details are yet to be developed. With respect to the recommendation, we feel there are more issues to be evaluated with these types of projects rather than simply driving "the final permitting and construction of several large scale seawater desalination plants". The questions include: How the project is developed, financed and implemented? • Who takes on the risks for the project? Who ultimately pays for it? The benefits need to be quantified and compared to alternative projects? For the San Diego desalination projects, what are the additional costs to be incurred to convey the water north into Orange County? Are these the most cost effective projects for Orange County? • For example, it may be more advantageous for the local agencies to take an equity position in the project rather than just purchasing water from Poseidon. It may also be a project that is best developed by Metropolitan Water District of Southern California because of their role as the regional water provider. Until such time as the permitting and costs have been estimated, these decisions remain to be answered. MWDOC is initiating a process to help answer these types of questions (the OC Water Reliability Study). The earliest information would begin to be available is in the first part of 2015.

R2

MWDOC and OCWD should work with legislators, contractors, other stakeholders, and the regulatory agencies to streamline and accelerate the large infrastructure permitting process. The goal should be the development of a one-stop agency capable of representing and adjudicating conflicting or overlapping agency permit requirements. (F.9.), (F.10.) The recommendation requires further analysis MWDOC has had the goal of streamlining the permitting process for some time and has held workshops on the topic to engage community leaders and policy makers. Most recently, MWDOC worked with the Public Works Coalition and the Association of California Water Agencies to draft and submit input for State legislative consideration. In the last year, the legislature considered only relatively minor changes from a number of options submitted, although there were a number of legislative bills proposed. Work on this topic continues, but there is no clear path forward or even agreement on changes that might be considered. The timeline for this is unknown and very unlikely due to environmental opposition to changing California Environmental Quality Act (CEQA). (NOTE: DOES NOT MEET THE TIMING NEEDS)

R3

MWDOC and OCWD should develop an interconnection process flow network diagram connecting all relevant OC agencies (City, County, and MET) and use it to investigate the impact of —what-if scenarios (various emergency outages due to failed wells and pumping stations, damaged piping, etc.) which could impact local district water supplies. Close coordination of resources and plans is necessary to integrate the local OC water infrastructure. (F.7.) The recommendation has been implemented, but not necessarily in the format suggested MWDOC and WEROC have completed a significant amount of emergency planning in Orange County as has Metropolitan Water District of Southern California. Combined with the retailers, we have a good collective understanding on the production and movement of water during normal operations and under emergency operations as they have been hypothesized and evaluated. Updates to prior work will be made as part of the OC Water Reliability Study and additional work is always helpful in preparing for emergency situations. Earthquakes and power outages are our biggest risks. MWDOC is in the process of collecting and analyzing the capability of the water system to operate in the absence of the electrical power grid and to develop a refueling plan to keep emergency generators running. The ability to secure fuel at various locations when the grid is out is a recently identified need. The results of this study effort will likely result in additional recommendations for emergency capabilities in Orange County. This effort is expected to be completed prior to January 2015.

R4

MWDOC should continue to monitor and support the BDCP, but a favorable resolution of water supply allocations and tunnel vulnerability issues is required before significant resources should be expended. (F.2.), (F.8.) The recommendation has been implemented MWDOC is on record as supporting the BDCP via adoption of a Resolution of Support for the BDCP in April 2014 and submittal of comments and support for the BDCP Alternative #4 in our BDCP Comment Letter of July 24, 2014 on the EIR/EIS. The BDCP is a critical investment to protect against further water supply losses from the State system. It will be incumbent on MWDOC and those with interests in the BDCP to apply pressure to ensure the project is implemented appropriately, including development of more reliable supplies. We have reviewed several presentations on the tunnel design for the prevalent conditions which indicate a highly reliable system that does not cross any major faults and has short sections that allow some movement without failure. Our understanding is that the tunnel design is the preferred alternative because it is the least risky water delivery route in the event of seismic activity in that region. We believe the Bay Delta solutions have been researched and studied sufficiently and that the BDCP is the best option we have explored for almost 100 years. It is important to note that in addition to the fifteen alternative options provided for consideration in the BDCP, there have been over seventy other alternative researched, study and considered since the early 1930's. The issues in the Bay Delta are not new, but the urgency to address them in a comprehensive co-equal manner has become critical. The time and resources to study the Bay Delta are over, it is time to build water reliability into the long term solution of the Bay Delta and we believe alternative 4, the tunnels, is the best option.

R5

MWDOC and OCWD should consider merging into a single wholesale agency to better evaluate, coordinate, and integrate more complex strategies involving the allocation and distribution of ground and imported water under emergency and climate change impacts. This merger would facilitate the implementation of Recommendations 1-4. (F.1.), (F.4.), (F.6.) The recommendation requires further analysis Over the past year, MWDOC and OCWD held a number of meetings regarding consolidation of the two agencies. Considerable time and effort was spent on: . Developing principles for consolidation including that the overriding basis for consolidation decisions is "the best interest of the citizens of Orange County," the best management of regional water resources and the most effective and efficient organizational structure. It was also agreed that: • The consolidation would not change existing groundwater or surface water rights. Existing financial liabilities would remain with the currently responsible agencies. The rights and representation of the Three Cities 0 (Anaheim, Fullerton and Santa Ana) would not change. They would retain their status, seats and voting power as MET member agencies. The initial and subsequent Board of Directors would be 0 elected from defined geographic divisions (except for the Directors appointed by the Three Cities). Divisions would be independently developed to reflect boards to 11. The general preference would be for a Board with 8 elected directors, plus the 3 directors from the Three Cities, for a total of 11 directors. The preference is for all elected directors to vote on all matters. The Three Cities would each retain one Director. The consolidation will require state legislation. The existing legislative powers of both MWDOC and 0 OCWD should be maintained in the new legislation. Powers should not be increased or decreased. The MWDOC Board also approved in their Principles of Consolidation that the consolidated entity should be: A new organization, with elected directors selected via a "consolidating election" (no incumbents appointed) Formed under a new legislative act Organized with a new name. • The OCWD Board did not agree with these final three points. • Several financial issues were identified in the discussions which led to the conclusion that the merger of the two organizations would NOT result in significant cost savings and may actually increase the costs to carry-out the functions of both entities. There would be significant transactional costs to the 0 consolidation and a myriad of consolidation issues which would require resolution and incur costs including the retirement programs, representation, debt structure, benefit programs and salary structure. It was noted that the two organizations generally work 0 well together in carrying out their individual functions and meeting the regional water reliability needs of Orange County and resource share in several areas. (NOTE: DOES NOT MEET THE TIMING NEEDS) Sincerely, Lary D. Dish -0 Larry D. Dick President