The California Public Utilities Commission has approved a controversial desalinization plant for the Monterey Peninsula on the state’s central coast that will solve the region’s water woes but at a high price.

The California American Water Company, known as Cal-Am, and local agencies will form a partnership to build and operate the $297.5 million desalinization project to replace supplies drawn from the Carmel River, the historical source of the region’s water.

To protect the Carmel River, the California Water Resources Control Board had ordered Cal-Am to stop diverting water by Dec. 31, 2016

“The Monterey Peninsula has been struggling to find solutions to the water supply deficit for decades,” the public utilities commission noted in its decision issued Thursday. “We emphasize the history to provide a context for our decision to reach outside the usual procedure and to approve a costly desalination project as a reasonable solution.”

Commissioners acknowledged that the project, which will desalinate 3.4 billion gallons of water a year, will result in a 63 percent rate hike for local residents.