Why does the State Water Project contract cost so much? Can one compare these costs to Lake Barryessa water costs? Why did Benicia give up its Lake Berryessa water contracts for the North Bay Aqueduct? Is there cheaper water in the future? Why does State Water Project Cost so Much? The City Councils Finance Committee has questions about the cost of water supplies, treatment and waste water. A hard concept to swallow and not very popular is that the price of water does not reflect the real cost of water. For some communities such as the City of Sacramento, this is especially true and for others such as San Diego probably not. We are somewhere in the middle. The history of Benicia water is complex. According to Thoughts on Water by a Late Arrival by Ron Hurlbut, Solano lobbied congress for the Monticello dam on the basis of water needs of the Benicia Arsenal, Mare Island Naval Shipyards, Travis and agriculture. Congress approved and appropriated money for the new Bureau of Reclamation (Bureau) dam in the 50s and the dam was built over several years and filled in the 1960s. At one time it was thought it should be part of the Central Valley Project (CVP), but it was built independently of the CVP. In the 1950s and 60s it was hard for all parties to pay for their water service contracts with the Bureau. Benicia traded their service contract to the City of Fairfield in exchange for future water service from the cheaper North Bay Aqueduct. Cities were charged $15 per acre--foot (AF), of water; farmers were supposed to pay $2.65 per AF but the County brought that cost down to $1.50 per AF with a county wide tax. Originally 80% of the water from Lake Berryessa was contracted to Ag; they were supposed to pay 80% of the cost of the Federal water project. As we approached contract renewal with the Feds in the late 1990s, we found the cities had paid close to 80% of the project cost. At contract renewal time with the Bureau of Reclamation the water allocations and pricing were left unchanged to the advantage of the farmers. In exchange, SID agreed to help the cities during an extreme drought, as was the case in the mid 1990s. Unsuccessful Effort to Purchase Monticello Dam. Well, what is the best way to avoid all the concerns about contract renewal? ? Purchase the federal dam, which was almost paid for, as required in the original water service contracts. For four years we pursued this concept with Federal staff people and congressional elected officials. This created quite a mess. The Mayor of the City of Benicia decided Benicia had been swindled out of their water rights from Lake Berryessa by the City of Fairfield. The truth was Benicia did not want to pay the cost of Berryessa water, $15 per acre---foot use it or not in the late 1950s. Fairfield agreed to trade 2 acre feet of water from the future North Bay Aqueduct for each acre foot of water from Lake Berryessa; at that time water was forecast to cost $10 per acre---foot from the North Bay Aqueduct. Benicias Mayor still pursued the issue back in Washington anyway. Napa County wanted water rights from Lake Berryessa because the lake is in Napa County, . . . . The University of California, Davis showed up wanting water rights for the school and fishery issues. Yolo County showed up wanting both water rights and additional water in Putah Creek for a new park the city of Davis wanted to build along the creek. The Feds were so keen on the idea of selling the dam they wanted us to pay the original construction cost inflated to 1990s cost. ($500 Million original cost raised to $5 billion dollars the project would cost today.) Needless to say, we dropped the idea of purchasing Monticello Dam. Benicia Water System Benicia. Benicia has had water service issues for years. In the late 1800s the city used water from the Sacramento River and Lake Herman. During dry years, the lake was not sufficient. The river water was salty and unusable, so water was brought in by barge. I am sure in later years Benicia received some help from Vallejo, but at a substantial price. The Solano Water Project is built and Benicia constructs a 24 inch water line from the terminal reservoir in Cordelia, along what is now Interstate 680 to their water treatment plant adjacent to Lake Herman. The Solano Water Project water is too expensive and Benicia trades their water entitlement from that source to Fairfield. Fairfield agrees to pay the $15 per AF and agrees to give Benicia twice the Berryessa entitlements. Benicia continues to use Lake Berryessa water, but only pays for what they use. Along comes the North Bay Aqueduct and Benicia is forced to switch from Berryessa water to Sacramento River water. What a surprise, initial project studies forecast a water cost of $10 per AF; current construction design priced water at $180 per AF. Not only did the price increase dramatically, but Benicia has to upgrade its water treatment plant in order to treat the river water, it was not an ideal situation for them. ********************************* As the Benicia Finance Committee knows a diverse portfolio is essential to sustain assets in changing economic cycles. This is the fundamental guiding principle in the California Water Plan. A water portfolio is both water supply and water use. Water supply is variable and uncertain due to dependence on climate and weather patterns. Water use is related as well since nearly 50% of water use is for landscaping. If it is hot, people water yards more. The water portfolio variability means that water management is adaptive management. Having several sources of water is better than a single source. We are realizing that is so true this year because of our dependence on the State Water Project (SWP). If the SWP was a bank account and there were 29 brothers and sisters each living in a different county and they all had equal access to this bank account, how long would the bank account last? This is essentially what the SWP is - a managed portfolio of water supply and use, and it is managed through common contracts. The contracts between each contractor and the state is an agreement that the contractor will pay for the entire system of the SWP (see below for details) and not just the volume of water used. Integrated water management is more challenging and the future is bleak when the trend for the Sierra snow pack is that it is shrinking. This snow pack is our largest reservoir and without it, precipitation cannot be stored with the existing facilities. The future is uncertain. Benicia began to focus on a more diverse water portfolio in the early 2000s. The Benicia Urban Water Management Plan identifies the sources of Benicias water supply and clearly notes that the total amount of contracted water Benicia has is not the sum total of water supply but rather a portfolio of water supply. In other words, dont count every last drop of our contract water for water supply calculations, but rather manage the contract water in a manner that allows us some flexibility. It is obvious that we have to create more diversity in our water supply and the most promising source is rain water capture, waste water treatment and maybe even desalination. The excerpt below is from the Benicia Herald article on the Finance Committees last meeting. Following the excerpt are a few facts about the SWP. In examining the citys warrant register, which records outgoing expenses, the panel heard Campbells explanation about a $176,300 expenditure for a second installment of its water contract. Benicias water purchase is complex and doesnt come from a single source, he said. The primary source is supposed to be the State Water Project, which normally provides the bulk of the water used by the city. However, this year, because of drought, state officials have announced variously that contractors such as Benicia would get 5 percent, no water at all, or 5 percent only after summer is over. Regardless of how much is delivered, the city is required to pay for its full allotment. [italics added and note the explanation below that the SWP contract charges are not for full allotment, but rather for the basic whole system] Campbell called it an incredibly bad deal, and said the agreement would last in perpetuity. [expected full bond payment is projected to be 2035]. He said the agreement looked good 25 years ago when Benicia contracted with the state for about 17,200 acre-feet of water each year, at a cost that averaged $22 per acre-foot. While Benicia rarely gets its full allotment - Campbell said its happened twice - the city usually receives plenty to cover annual community needs, about 11,000 acre-feet. The drought caused the state to reduce distribution to the point Benicia has limited access to other water it holds in reserve. If the city gets 5 percent of its allotment, it would be paying the equivalent of $440 an acre-foot, Campbell said. The Council has authorized spending up to $900,000 on water to meet 2014 needs. But with the drought, he said, water is selling for $600 to $1,000 for an acre-foot by those who have it to spare. When you have enough water to sell, nobody wants to buy, Campbell said. Oroville Dam The California State Water Project is the nations largest state-built water and power development and conveyance system. It includes facilities-pumping and power plants; reservoirs, lakes, and storage tanks; and canals, tunnels, and pipelines-that capture, store, and convey water to 29 water agencies. During the 1960s, as the Project was being constructed, long-term contracts were signed with public water agencies, known as the State Water Project contractors. They receive annual allocations, specified annual amounts of water, as agreed to in their contracts, which will expire in 2035. In return, the contractors repay principal and interest on both the general obligation bonds that initially funded the Projects construction and the revenue bonds that paid for additional facilities. The contractors also pay all costs, including labor and power, to maintain and operate the Projects facilities. Deliveries The SWPs water supply capability depends on rainfall, snowpack, runoff, reservoir storage, pumping capacity from the Delta, and legal environmental constraints on project operations. Project water supply comes from storage at Lake Oroville and high runoff flows in the Delta. Water deliveries have ranged from 1.4 million acre-feet in dry years to almost 4.0 million acre-feet in wet years. In January 2000, the SWP exceeded 60 million acre-feet in total deliveries since operations began in 1962. SWP Annual Water Deliveries Chart In most cases, contractors use SWP water to supplement local or other imported supplies. Five contractors use Project water primarily for agricultural purposes (mainly southern San Joaquin Valley); the remaining 24 primarily for municipal purposes. Service Areas The service areas of these contracting agencies extend from Plumas County in the north to San Diego County adjacent to the Mexican border. These contractors service areas comprise almost one quarter of Californias land area and more than two-thirds of its population. While many of the contractors are agencies that have been in existence for many years, a number of the districts were formed for the express purpose of contracting for SWP water (Water Contractors Service Areas & Annual Allocations). The SWP made its first deliveries in 1962 to the Bay Area. In 1968, service was extended into the central and southern San Joaquin Valley, and by 1972, Southern California areas began receiving their first deliveries. SWP Contractors Payments SWP contractors pay the same amount per acre-foot of their allocations for constructing and operating the SWP conservation facilities, which are used to develop the Projects water supply. These facilities include Lake Oroville, San Luis Reservoir, and a portion of the California Aqueduct from the Delta to San Luis Reservoir. The Delta Water Charge, which is common to all contractors, provides funds to maintain water quality in the Sacramento-San Joaquin Delta, where the water is exported to various regions of the State. Each contractor also pays transportation charges for the construction, operation, and maintenance of necessary facilities to convey water to their respective locations. The greater the distance the water is transported, the higher the cost. The SWP contractors also repay all costs related to the Project (SWP Contractors Financing Repayment Charts). Annual repayments total about $600 million a year (2002). Of that amount, operation and maintenance (O&M) costs for labor and equipment account for 30 percent. The cost for power (purchases less generation and sales) amounts to 20 percent. Bond service payments of principal and interest and repayments for other capital financing are about 50 percent. Through 2001, the contractors have paid cumulative payments totaling $9 billion. State Water Project Facts and Figures Number of storage Facilities 33 Lakes/Reservoirs (primary) 21 Total Reservoir Storage 5.8 million acre-feet = 7.2 cubic kilometers Largest Reservoir Capacity 3.5 million acre-feet = 4.3 cubic kilometers Largest Reservoir Surface Area 15,810 acres Longest Reservoir Shoreline 167 miles Highest Dam Structure 770 feet = 235 meters Largest Dam Structure 80 million cubic yards = 61 million cubic meters Longest Dam Crest 42,000 feet = 12,802 meters Highest Dam Crest Elevation 5,785 feet - 1,763 meters Length of Canals and Pipelines 701 miles = 1,128.15 kilometers Hydroelectric Power Generation-(1983-2002) Largest Annual Energy Output 8.57 Billion kWh (2002) Average Total Energy Generated Annually 6.5 Billion KWh Average Annual Energy Available 8.6 Billion KWh Average Net Use 5.1 Billion kWh California Aqueduct Starting Maximum Pumping/Canal Volumes 10,670 cfs /10,300 CFS Largest Pumping Capacity 15,450 cfs Largest Canal Capacity 13,100 cfs Widest Part of Canal 110 feet Deepest Part of Canal 32.8 feet Highest Pump Lift/Volume 1,926 feet = 587 meters/4,480 CFS Financing of the SWP By the end of 2001, about $5.2 billion had been spent to construct SWP facilities. Future projects focus primarily on maintenance and repair projects. SWP financing of capital expenditures has come from various sources, the major source being the sale of general obligation and revenue bonds, all repaid by the SWP contractors, 29 public agencies that have contracts for water deliveries from the Project. Other capital funding sources have included tideland oil revenues, investment earnings, funds advanced by the contractors, recreation appropriations, and federal flood control payments.
Posted on: Thu, 29 May 2014 02:50:55 +0000
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