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After a long hiatus, Morena Reservoir is back in service…for now

Posted by George J Janczyn on December 11, 2013

[updated with an additional image of Barrett Dam]

After a nearly 7-year break in operations—with a brief restart in February this year only to be halted again—water from Morena Reservoir is again flowing toward the City of San Diego.

From Morena to San Diego

Morena is an expansive, but relatively shallow, lake.

Morena is an expansive, but relatively shallow, lake.

Morena Reservoir is located in East County about 45 miles from San Diego, near Campo. Water released from Morena flows down Hauser Canyon and into Barrett Reservoir (all photos can be clicked for enlargement).

Barrett Dam seals a deep narrow canyon with steep walls.

Barrett Dam seals a deep narrow canyon with steep walls.

Barrett is situated about 10 miles west of Morena, at the confluence of Cottonwood and Pine Valley creeks. Water is then released from Barrett and conveyed via the Dulzura Conduit to the Lower Otay Reservoir where it is treated and delivered to San Diego residents.

The concrete conduit snaking down the steep canyon below the dam. Access is from the service road below.

The concrete conduit snaking down the steep canyon below the dam. Access is from the service road below.

The Dulzura Conduit is a critical component making the whole system work.

The Dulzura Conduit is a 13-mile-long aqueduct beginning at Barrett, mostly concrete-lined but partly flumes, pipelines, and tunnels. Passing through remote and rugged terrain the Conduit diverts water west to Dulzura Creek leading to the Otay River. The water then flows through the river channel into the Lower Otay Reservoir.

Without the Dulzura Conduit serving as a diversion at Barrett, water released at the dam would otherwise continue down Cottonwood Creek which flows south into Mexico and joins the Tijuana River.

The Conduit was originally built in 1907-1909 by the Southern California Mountain Water Company under control of John D. Spreckels.

Rain and fire

The Conduit was renovated in the mid-1990s to replace the original wooden flumes and trestles with steel pipe on concrete and steel supports. Because of the remote location, helicopters were needed to support many aspects of the project.

_DSC6462A _DSC6436A

In 2004-2005, however, heavy rains severely damaged the Conduit. Before repairs could be performed, the Harris Fire in 2007 caused further damage. Extensive repairs had to be planned, funded, and carried out.

The Conduit, with a capacity to move close to 40 million gallons per day, finally became operational beginning January 2011.

This picture (better enlarged) shows a segment of partly covered conduit, pipeline, and hair-raising service road etched into the steep canyon wall.

This picture (better enlarged) shows a segment of partly covered conduit, pipeline, and hair-raising service road etched into the steep canyon wall.

The Conduit came online just in time because that’s when Mayor Jerry Sanders ordered the Public Utilities Department (PUD) to absorb the 2012 rate increase for imported water purchased from the San Diego County Water Authority (SDCWA) instead of passing along the increase to San Diego ratepayers. PUD was to absorb the expense in part by drawing down local reservoirs (including Morena) so that less imported water would need to be purchased, and also by cutting staff and implementing “efficiencies.” In 2012, Sanders renewed ordered PUD to continue absorbing costs when SDCWA announced imported rate increases for 2013.

Morena drawdown encounters resistance

By 2013, enough water had been removed from Barrett that the City could start taking water from Morena. The original plan was to release about 20 million gallons per day from Morena to Barrett between February and June 2013. This was expected to save about $5 million in avoided imported water purchases. However, objections from the County of San Diego caused operations to halt in March 2013.

The low-water boat dock at Morena. Another boat ramp higher up doesn't reach the water at this level.

The low-water boat dock at Morena. Another boat ramp higher up doesn’t reach the water at this level.

While the City owns the Morena dam, reservoir, and land around the reservoir, it has a lease agreement with the County which maintains the area for recreational purposes. The County said it felt that drawing down the reservoir would have negative consequences for recreational users, local residents, and the environment, and it requested that less water be taken. The ensuing controversy about this is documented in this East County Magazine story by Miriam Raftery and discussed further in this Reddit thread.

The City responded it was willing to limit the drawdown at Morena if the County would be willing to buy the water needed to keep the reservoir at the requested higher level, at a cost of about $1.7 million.

Receiving no further response from the County, the City resumed releasing water from Morena on December 1 (also noted by Fox5 San Diego). The drawdown is expected to continue for another 2 months or so until Morena’s level reaches 2,000 acre-feet.

Besides saving money for San Diego water customers, lowering the water level at Morena will facilitate a Capital Improvement Program project at the dam required by the California Division of Safety of Dams. As explained by Brent Eidson, PUD’s Deputy Director of External Affairs:

“Much of the mechanical equipment inside the existing outlet tower was installed in 1912 and has managed to operate well past its service life. In the interest of safety, the California Division of Safety of Dams (DSOD) is requiring the Department to renovate the outlet tower and add improvements to the dam.

As part of this CIP project, the top 23 feet of the outlet tower will be demolished and replaced with a new structure that will include a bridge extending to the top of the dam. All pipes, valves, ladders, and platforms inside the tower will be replaced. This project also includes a seismic stability evaluation of outlet tower and construction of a new parapet wall on top of the dam. The reservoir outlet pipe will be upsized to meet the DSOD emergency drawdown requirements. The estimated cost of this project will be in the range of $8 million. The project construction is scheduled to start in late 2014 and continue through 2017. The timing of this CIP project was set based upon City’s planned operation to lower the reservoir in order to reduce CIP-related costs.”

Although not a deciding factor, high reservoir evaporation at Morena was an additional consideration. Eidson says “It’s not so much that there is too much surface area, in total, but that the lake is relatively shallow (when compared to other lakes), so the combination of these, as well as the drier and hotter climate in the summer at this location is what leads to increased evaporation.

Morena Reservoir for water supply versus Lake Morena for recreation

_DSC4127A

This isn’t the first time controversy has bubbled up over water withdrawals from Morena. This Los Angeles Times story describes an outcry over withdrawals that took place in 1989, with a similar outcome: the drawdown continued.

Part of the public relations problem, it seems to me, stems from the fact that large water releases from Morena are not a regular occurence. Once several years go by with relatively high and stable water levels, residents and recreational users come to expect it will stay that way. That creates a shock when it becomes necessary to withdraw water.

If the County were to agree to buy water to keep the reservoir level higher, it would likely require negotiating a rather detailed conditional agreement, since the main reason for the reservoir is, after all, to provide San Diego with a local source of drinking water (and as a bare minimum, an emergency supply). My guess is that the County prefers to avoid an expensive and complicated arrangement.

A very wet (but not TOO wet!) rainy season in the coming months would probably ease tensions all around.

Note about the photographs. I took the photos of Morena reservoir in July 2013, and the photos of the Dulzura Conduit on December 5, 2013 during a visit to Barrett Reservoir arranged through the Public Utilities Department with Brent Eidson’s assistance.

 

Posted in Environment, San Diego Public Utilities Department (PUD), Water, Water rates | Tagged: , , | Leave a Comment »

San Diego water rates going forward

Posted by George J Janczyn on November 25, 2013

By now most San Diego water customers have heard that the City Council last Thursday approved water rate increases for the years 2014 and 2015 (Item-620 on the docket).

Bill

The main reason for the increase was that the price of imported water keeps going up and the Public Utilities Department (PUD), as we know, needs to purchase that high-priced water to supply over 80% of the city’s needs. PUD buys imported water from the San Diego County Water Authority (SDCWA) which in turn buys its water from the Metropolitan Water District of Southern California (MWD) and from the Imperial Irrigation District (IID).

Compared to price hike hearings in previous years, this time relatively few people were up in arms. Even though several of the 37 people who submitted protest slips at the meeting seemed quite indignant, many who spoke expressed disappointment and unhappiness but appeared resigned to the fact that PUD has little choice but to recover the price it pays for imported water. Even U-T San Diego, normally happy to throw gasoline on smouldering embers, refrained from inflammatory editorializing.

Still, there are some valid reasons for general dissatisfaction with the situation.

A seemingly abrupt and large price increase

In 2011 former San Diego Mayor Jerry Sanders directed PUD to absorb the higher price of imported water in 2012 and shield city customers from the rate increase. PUD managed this by cutting staff, creating new “efficiencies” in operations, and by drawing more water reserves that originated from local watersheds so that less imported water would need to be purchased.

In 2012 Sanders ordered PUD to continue absorbing higher imported water costs when imported water rates went up again for 2013.

For 2014 PUD was faced with serious financial and operational difficulties if forced to continue under the above constraints as the imported price continued to rise. Further, it appeared likely that the city’s credit rating could be downgraded as a result. Thus, the proposed rate increases.

At Thursday’s meeting before casting the only vote against the new rates, Councilmember Scott Sherman complained: “we’ve said all along that we’ve absorbed the rate increases on ratepayers for the last two years, but in this case we’re going back and trying to recover those rate increases” — as if to suggest that PUD absorbing the rate increase over the previous two years meant that in the future customers should never have to pay the true cost of imported water (or perhaps it was just political posturing).

In truth, Public Utilities did absorb the rate increases, to the tune of some $35 million in added water costs over those two years. But it should have been clear to all that by absorbing the rate increase for two years PUD was postponing the day when customers would have to pay the full price, not exempting customers from ever paying the real price.

PUD obviously cannot continue paying the full price for imported water as the price continues ever upwards while reselling it to city customers at below cost.

It’s wrong for Sherman and others to try to paint this situation as PUD covertly trying to recover the $35 million that it absorbed over 2012-2013.

Unfortunately it’s true that after being shielded from the rising price of imported water for two years, customers will feel the impact more acutely than if the price had incrementally increased in smaller steps over that period.

Reservoir storage impacted

PUD hasn’t publicized which reservoirs it has been drawing down as a result of the Sanders directive, but one can view the monthly report of reservoir storage published by SDCWA to see the general picture. In the city reservoirs that depend solely on local watershed and cannot be replenished with imported water (Barrett, El Capitan, Morena, Sutherland), storage levels are clearly low. Actually El Capitan does have a small capacity connection for imported water but it is rarely used — June 2009 was the last time a small amount of imported water was delivered to El Capitan. The other reservoirs have connections to receive infusions of imported water so their higher levels aren’t the best indicators of local conditions.

City of San Diego reservoir storage data October 2013 (source: San Diego County Water Authority)

City of San Diego reservoir storage data October 2013 (source: San Diego County Water Authority)

 

The city intends to withdraw even more water from Lake Morena reservoir in December in an attempt to save an additional $5 million in avoided imported water purchases. According to PUD Deputy Director of External Affairs Brent Eidson, the city will draw down and use water from the 50,694 acre-foot capacity Morena reservoir (now only 13% full with about 20,000 acre-feet of usable water left) until it reaches a virtual dead pool of 2,000 acre-feet, the point at which the intakes can no longer remove the water.

Miriam Raftery describes the resulting Lake Morena controversy in this East County Magazine report.

Still, while the city avoided buying some imported water over the last two years and will squeeze the last drops out of Morena, it cannot indefinitely draw down its other supplies without jeopardizing the reserves maintained for emergency (and I don’t think higher prices for imported water constitutes an emergency). Plus, the staffing cuts and other cost-cutting moves have surely taken a toll on the department’s morale and well-being. And, to the extent that the city may need to buy extra imported water in the future to compensate for the local reserves used up over the last two years, new imported water at much higher prices will be the cost.

During the public hearing, Council President and Interim Mayor Todd Gloria said that forcing PUD to absorb those costs undermined the city’s creditworthiness and negatively impacted maintenance of water infrastructure.

Councilmember David Alvarez said “we basically underfunded the system for a couple of years and cannot continue to act in this irresponsible manner going forward.”

Bottom line: Mayor Sanders’ politically motivated directive only set up the water customers for a rude awakening, put PUD in a difficult financial position & jeopardized the city’s bond credit rating, and gambled with the city’s water reserves.

New pricing tiers

In addition to higher prices for imported water, the existing 3-tier pricing system will be replaced by a new 4-tier price structure (see chart). A somewhat confusing U-T San Diego story tried to explain the new structure. News 8, San Diego 6, La Jolla Patch, and 7 San Diego also weighed in.

Put simply, the intent behind the new tiers was to minimize rate increases for those who conserve and to penalize excessive consumption.

Existing and proposed monthly pricing tiers. HCF=hundred cubic feet (source: City of San Diego Notice of Public Hearing for the water rate increase).

Existing and proposed monthly pricing tiers. HCF=hundred cubic feet (source: City of San Diego Notice of Public Hearing for the water rate increase).

PUD’s Brent Eidson informed me via email that 20.1% of water customers are expected to fall into the lowest first tier, 51.6% will be in the second tier, 16.6% in the third, and 11.6% in the highest tier.

The problem is that as a means to encourage water conservation the tiered pricing structure can seem rather arbitrary.

At the public hearing Councilmember Mark Kersey sounded off about this, saying he thinks a tiered structure “is archaic and crude.” He suggested that San Diego should consider a water budget based billing system that takes into account various household sizes and needs, similar to the successful Irvine Ranch Water District’s billing system.

Kersey may have forgotten it was only recently (July) that the City Council’s Natural Resources and Culture Committee (NR&C) reviewed PUD’s Water Budget Based Billing Report. After considering the report, NR&C decided to rule it out for residential customers because the report projected $5.7 million in one-time expenditures to design and implement the system, $3.6 million annually in ongoing costs for billing system enhancements, and unspecified labor and expense for handling individual variance requests from users who would seek adjustments to water budgets assigned to them.

The report also indicated that water budget based billing would also not be worthwhile because it would change the usage habits of only a small percentage of customers.

Note that Irvine Ranch’s customer base is much smaller than San Diego’s and implementing a water budget based system was less daunting than it would be for San Diego.

Still, water budget based billing remains attractive to many other people (myself included) and the idea is likely to be revived in the future. My earlier report on water budget billing discusses this billing method and related issues in more detail.

More rate increases in the forecast

It's still unknown what effect Poseidon's Carlsbad Desalination Plant under construction next to the Encina Power Plant will have on San Diego water rates.

It’s still unknown what effect Poseidon’s Carlsbad Desalination Plant under construction next to the Encina Power Plant will have on San Diego water rates.

It’s not over. Not only are more rate increases for imported water certain in the future, two other factors will push water prices even higher:

  • Desalinated water. While San Diego normally purchases only less expensive untreated imported water because it has its own water treatment plants, it definitely wants to be able to purchase treated desalinated water if the need arises. Therefore the city will need to pay “availability” fees to SDCWA for access to desalinated water, plus the price of desalinated water itself. Desalinated water will be much more expensive than the present cost of imported water, although SDCWA has not yet announced exactly what those prices will be. Presently the imported price is about $800 per acre-foot while desalinated water is expected to be in the vicinity of $2,000 per acre-foot.
  • The upcoming July 31, 2015 expiration of the EPA Point Loma waiver. The waiver allows the Point Loma Wastewater Treatment Plant to discharge partially treated wastewater into the ocean (“advanced primary treatment”) instead of upgrading to secondary treatment as required by the Clean Water Act. The current waiver was granted on condition that the city recycle more water and greatly reduce the amount of wastewater discharged at Point Loma. So far not enough recycling is being done. In order to avoid steep financial penalties and be forced to upgrade the Point Loma facilities at great expense, the city will try to negotiate for yet another waiver by demonstrating its commitment to divert ever-larger amounts of wastewater from Point Loma into a large-scale potable reuse program. Regardless of how this all plays out, it will end up raising water and/or sewer rates. Click here for a detailed examination of this issue.

There WAS something to chuckle about at Thursday’s public hearing: Councilmember Sherri Lightner said “Some day we will get to the point where our city is selling water, not buying it. That’s my vision.”

 

Posted in Point Loma Wastewater Treatment Plant, San Diego Public Utilities Department (PUD), Water, Water rates | Tagged: , , , | Leave a Comment »

San Diego City Council to consider 2013 water rate case (updated)

Posted by George J Janczyn on August 1, 2013

RESIDENTS WHO CONSERVE COULD SEE LOWER RATES IN 2014

The San Diego City Council’s Natural Resources & Culture Committee (NR&C) on July 31 accepted a proposal for a new water rate billing structure, including a rate increase, and sent it to the City Council for consideration at its September 10 meeting. The committee recommends a new billing method that would use a four-tier rate structure designed to provide a greater financial incentive to conserve water. The current rate structure has three tiers with weaker conservation incentives.

The new rate structure is an option in the 2013 Water and Wastewater Cost of Service Study delivered at the NR&C meeting. 43 percent of the water ratepayers in San Diego (those who use 10 HCF or less per month) could see lower rates under the new plan, according to Public Utilities Department (PUD) staff that presented Study. Those who consume water at the high end of the scale (19+ HCF) would pay dramatically higher rates (HCF = Hundred Cubic Feet = 748 gallons). More details about rates will follow below.

Current operating situation of the Public Utilities Department.

Current operating situation of the Public Utilities Department.

BACKGROUND

For the past two years PUD has been operating under a requirement to “absorb” rate increases for imported water that it buys from the San Diego County Water Authority (SDCWA or CWA), rather than pass the cost on to ratepayers. San Diego imports some 80% of the water it uses.

The decision to do that was made by then-Mayor Jerry Sanders in mid-2011. The news was well-received by the public, likely because of the recession, high unemployment rates, and of course, because nobody likes rate increases. Public opinion and Sanders’ decision may also have been influenced by Carl DeMaio, a city councilmember who had positioned himself as a mayoral candidate for the 2012 election and was waging an aggressive campaign arguing that past water rate increases had been excessive due to mismanagement within PUD. One of DeMaio’s goals was to cut water rates by 15% and then freeze rates at that level for five years.

So, PUD had a tightrope to walk.

SUSTAINING OPERATIONS

To “absorb” SDCWA’s 2012 rate increase PUD cut back on contracts, supplies, materials, personnel, and drew down reservoir “surplus” so that less imported water would need to be bought, at a fiscal impact of $17.5 million.

This year, the fiscal impact on PUD from SDCWA’s 2013 price increase is estimated to be $20.6 million due to further cuts in contracts, supplies, materials, personnel, and drawdown of reserve funds.

“Over the last two years (Calendar Years [CY] 2012 and 2013), PUD absorbed CWA’s purchased water increases. PUD estimates that the cumulative impact of these increases is approximately $35 million. PUD was able to absorb the impacts through a combination of one‐time revenues, drawing on reserves, and implementing operational efficiencies. However, as Tables 10 and 11 indicate, continued absorption of the CY 12/CY 13 pass‐through increases, and trying to absorb the CWA CY 14 increase is not sustainable. If the City does not make revenue adjustments in FY 14, then by FY 15, PUD will not meet DSC requirements for senior or aggregate debt.”

(From the Study)

“ABSORB” IS THE WRONG WORD

The problem with saying PUD had to “absorb” higher rates is that they are not one-time expenses; they are permanent, and future SDCWA rate hikes will just add to the burden.

Assistant PUD Director Alex Ruiz made just that point at the Independent Rates Oversight Committee (IROC) at its July 18, 2011 meeting, saying the situation would be more properly called “Deferral of Rate Increases” rather than absorption of increased costs.

On top of all that, new imported water rate increases for 2014-2015 have already been announced by SDCWA.

Water purchases have decreased while cost has gone up.

Water purchases have decreased while cost has gone up.

FACING THE INEVITABLE

It seems fairly obvious that in order for PUD to continue as a viable self-supporting enterprise (i.e., not funded by local taxes), water rates will have to go up. But what should the price be?

Guidance on that question is contained in the Cost of Service Study delivered to NR&C (the study is also referred to as the 2013 Rate Case). The Study examined “what actions the PUD should undertake to maintain the financial viability of the Water and Wastewater enterprises in light of the results of the 2007 Rate Case, increasing purchased water costs, minimal economic growth, regulatory requirements, and needed future large infrastructure investments.”

The Study has three components: (1) Determining total revenue requirements; (2) Allocation of costs to the appropriate customer class; and (3) Rate design.

CHALLENGES AHEAD

“Since 2008, the effective rate that the City pays for purchased water from CWA (cost/acre‐foot purchased) has doubled. Infrastructure investments by both CWA and Metropolitan Water District of Southern California, restricted allocations from the Colorado River, and the Bay‐Delta all continue to drive costs up, while declining sales reflecting conservation efforts are driving down revenues.”

“Historically, the City has passed increased rates from CWA through to ratepayers. Over the past two years (Calendar Years 2012 and 2013), PUD has used one‐time revenue sources, identified operational efficiencies, and additional local supplies to absorb the CWA pass‐through increases, which is estimated to be approximately $35 million. These increases, however are not one‐time, but continue on yearly. Continuing to absorb these increases creates a structural deficit that is not sustainable. ”

“Over the past two years (Calendar Years 2012 and 2013), PUD has used one‐time revenue sources, identified operational efficiencies, and additional local supplies to absorb the CWA pass‐through increases, which is estimated to be approximately $35 million.”

(From the Study)

The Study suggests a revenue adjustment of 7.25% in FY14 and 7.5% in FY15 for PUD. That translates into two rate increases over the two year period. Several options for a new tiered billing structure were given, and as noted earlier, the NR&C committee recommended Option 4 (shown in the tables below).

PUD will still need to finance some capital improvement projects through a combination of fully drawing down the Dedicated Reserve from Efficiency and Savings (DRES) fund and using cash on hand.

Fortunately, the Study’s recommendation for wastewater rates (sewer charges) is to leave them alone. The Study says, “Based on the analyses of revenues and revenue requirements, Black & Veatch recommends that Wastewater does not need a rate revenue increase in FY 14 and FY 15.”

NEXT STEPS

The Study (or Rate Case) will be placed on the September 10 City Council agenda. If councilmembers approve the rate proposal, they will schedule a public hearing in accordance with Proposition 218. That would have to happen fairly soon, since the plan aims for the first rate increases to take effect on January 1, 2014 and the second increase on January 1, 2015.

Keep in mind that further rate increases, in addition to those proposed, are possible in the future because the Cost of Service Study didn’t take into account future expenses from potable reuse projects, desalinated water from Poseidon’s Carlsbad Desalination Plant, and the coming 2015 expiration of the waiver that allowed the Point Loma Wastewater Treatment Plant to avoid upgrading to the secondary treatment standard mandated by the Clean Water Act. If negotiations for a new waiver are unsuccessful the City could face some very expenses choices.

WATER RATE DETAILS

The tables below illustrate the various options identified in the Cost of Service Study. Again, option 4 was the committee’s preferred alternative. Beneath the tables, there are links to documentation submitted to NR&C.

ProposedMeterRates

ProposedCommodityRates

ProposedIrrigationCommodityRates

 

SUPPORTING MATERIALS SUBMITTED TO THE COMMITTEE

______________________________

UPDATE September 8, 2013: below are links to selected documents that were posted as accompanying materials for the September 10 City Council agenda item on this topic.

 

Posted in San Diego County Water Authority (SDCWA), San Diego Public Utilities Department (PUD), Water | Tagged: , , , | 2 Comments »

Bureau of Reclamation awards $1.025 million toward San Diego watershed basin study

Posted by George J Janczyn on July 29, 2013

The U.S. Bureau of Reclamation has agreed to contribute funding in the amount of $1,025,000 in fiscal year 2013 for a San Diego Watershed Basin Study proposed by the City of San Diego along with two other local agencies.

According to San Diego’s proposal, the study’s two primary objectives are:

  1. Determine how climate change will impact the current and future water supply portfolio of the San Diego region.
  2. Develop infrastructure options within the San Diego Basin that can serve as adaptation strategies to manage climate change impacts, focusing on optimizing the reservoir systems and furthering development of indirect potable reuse.

There are uncertainties associated with Northern California and Colorado River water (regulatory restrictions and dry conditions, respectively) upon which the San Diego region relies for 70-90% of its needs. While previous work has been done to address the potential gap between supply and demand from the above causes, the potential climate change effects were not taken into account. The proposed watershed basin study would analyze those effects.

The San Diego Public Utilities Department (PUD) is the project sponsor, with the San Diego County Water Authority (SDCWA) and the County of San Diego serving as partners.

The San Diego watershed basin study is comprised of six sub-hydrologic units (HU) within San Diego County highlighted above in blue.

The San Diego watershed basin study area is comprised of the six sub-hydrologic units (HU) within San Diego County highlighted above in blue. Click map to enlarge.

Budget: $1 million was requested from Reclamation, a grant of $782,244 was secured from the San Diego Integrated Regional Water Management (IRWM) Program, and $300,000 would be paid by PUD creating a project total of $2,082,244.

The San Diego IRWM Program, formed in 2005, has a vision for “[a]n integrated, balanced, and consensus-based approach to ensuring the long-term sustainability of the Region’s water supply, water quality, and natural resources.”

In addition to approving the requested $1 million, the Reclamation Bureau granted an additional $25,000. In its notification letter to the city, the Bureau said “…funding will be provided in two phases. First, $25,000 will be allocated for the development of a detailed Plan of Study… [and] Contingent upon Reclamation’s approval of the Plan of Study, $1,000,000 will be allocated for conducting the study.”

Work on the Plan of Study and a Memorandum of Agreement begins today at a kickoff meeting between the study partners and a representative from Reclamation. The Plan must be submitted for approval by September 30.

The new basin study might be able to consider aspects of a four-reservoir intertie project for which San Diego and Sweetwater Authority tried to execute a feasibility study in 2011 but were unsuccessful partly because, according to PUD Principal Water Resources Specialist Cathleen Pieroni, hoped-for funding from the Bureau of Reclamation fell through because the Bureau was unable to get an allocation from Congress did not appropriate the funding necessary to complete the Study that it authorized.

Tasks for the San Diego Watershed Basin Study include basin water supply and demand projections, climate change evaluation, development of adaptation strategies, and a trade-off analysis. The final report is expected to be ready in mid-2015.

 

Posted in Environment, Land use, San Diego County Water Authority (SDCWA), San Diego Public Utilities Department (PUD), Water | Tagged: , , | Leave a Comment »

San Diego campaign politics interferes with oversight of Public Utilities Department water operations

Posted by George J Janczyn on March 30, 2012

On April 18, 2007, before San Diego’s Water Department and Metropolitan Wastewater Department were combined into the Public Utilities Department (PUD) the San Diego City Council enacted an ordinance to establish an Independent Rates Oversight Committee (IROC):

“It is the purpose and intent of the City Council to establish the Independent Rates Oversight Committee to serve as an official advisory body to the Mayor, City Council, and City Manager on policy issues relating to the oversight of the City of San Diego’s public utilities department operations including, but not limited to, resource management, planned expenditures, service delivery methods, public awareness and outreach efforts, high quality and affordable utility services provided by the public utilities departments, including the Water and Metropolitan Wastewater Departments. In addition, the Independent Rates Oversight Committee is established to assist the City in tracking and reviewing the use of rate proceeds to advance the capital improvements related to rate packages and work programs adopted by the City Council.”

The ordinance provides for a committee of eleven members plus several ex-officio members. It requires that a majority of the members of the committee shall possess expertise in one or more of the following areas: accounting, auditing, engineering, biology or environmental science, finance or municipal finance, law, and construction management.

Take some time to examine the IROC website agendas and minutes and you’ll understand the considerable effort IROC and its subcommittees put into meaningful oversight on issues that involve ensuring a safe and reliable water supply, sound environmental management, reasonable rates, wise investments, efficient operations, a knowledgeable public, and a sustainable water and wastewater system.

IROC members have contributed countless hours to help San Diego deal with its complex, difficult water and wastewater management challenges. Consider also that the committee members labor without financial compensation–we should be grateful to these dedicated civic-minded volunteers working to improve the community.

Unfortunately the City of San Diego’s Public Utilities Department (PUD) takes its marching orders from the Mayor and City Council. It shouldn’t be hard to see that powerful and wealthy competing interests consume large portions of these politicians’ time, so that a solid background of knowledge, expertise, and understanding of San Diego’s water and wastewater management issues is not a particularly strong suit.

IROC, therefore, has the broad expert knowledge to perform competent oversight that helps compensate for political interference or indifference over the Public Utilities Department.

Water rates are one political issue that some politicians are using in their campaigns. Some politicians are prone to blame high water rates on excessive salaries or financial mismanagement but you don’t usually hear them pointing out that 80% to 90% of San Diego’s water must be imported and the wholesalers selling the water control the price and we have to pay it. San Diego is in a semi-arid region with very limited local water resources, so it’s simply a fact of life that if you want to live in San Diego you’re going to pay plenty for water.

Even though IROC spends a great deal of time reviewing a broad array of factors that influence water rates, the fact is that San Diego has only limited control over water rates. On top of the massive water purchases, there are capital improvements, infrastructure upgrades, replacement of aging pipelines, performing tasks required by law or consent agreements and numerous other factors that make water cost so much.

Notwithstanding Councilmember Carl DeMaio’s claim that he can reduce water rates by 15% and keep that rate frozen for five years, the fact is that the cost of doing so would prevent replacement of worn out infrastructure and preventive maintenance. We would soon face even more broken pipes, sewage spills, wrecked streets, flooded homes, boil water orders, fines, and court orders. It’s important for PUD to be run as efficiently as possible, but cost control must not be an excuse to defer action on innumerable requirements to keep things working. It would certainly make people consider water conservation a lower priority.

Lately, IROC has increasingly been targeted by politicians and affiliated groups who allege it isn’t doing its job as mandated by the city ordinance.

For example, on November 7, 2011, in response to questions raised by Audit Committee member Thomas Hebrank about IROC needing to procure performance audits, an Independent Budget Analyst report was delivered to the committee. The report provides good clarity about the financial constraints IROC faced in initiating such audits.

The City Attorney also was queried by Audit Committee questions that implied IROC was acting beyond the scope of its responsibilities. The City Attorney’s reply was “Based on our review of the annual reports, we conclude that IROC’s recommendations and findings are within its scope of duties as described in the SDMC.”

The same City Attorney report also replied to questions from the Natural Resources and Culture Committee as to (l) whether IROC should be reviewing City policies regarding the water and wastewater utilities or be focusing solely on the City’s use of ratepayer funds, and (2) whether review by IROC is a prerequisite to City Council action on water and wastewater matters.

In this case, the City Attorney concluded that “The focus of IROC is oversight of water and wastewater ratepayer funds and the perfonmance of
the City utilities. IROC is also tasked with advising the Mayor and City Council on policy issues related to water and wastewater service, having assumed that responsibility of the formerer PUAC. While prior review by IROC is recommended so that IROC can accomplish its mission, IROC review is not a legal prerequisite to City Council action.”

Subsequently, on March 5 there was an Audit Committee agenda item entitled “Proposal to Authorize City Auditor to Conduct PERFORMANCE AUDITS OF WATER AND WASTEWATER SYSTEMS. Interestingly, the supporting document for that item was a proposal from the San Diego County Taxpayers Association dated February 2012 entitled “Independent Rates Oversight Committee (IROC) Proposed Municipal Code Revisions”. A reading of the proposal to revise the ordinance seems to indicate that it would significantly curtail the scope of IROC and possibly hamper IROC’s ability to provide value to the Mayor and City Council.

A look at the Audit Committee Actions document for that meeting shows that things went considerably further than authorizing the city auditor to conduct performance audits. Indeed, the action taken was based on the SDCTA proposal to revise and limit IROC’s scope of responsibilities:

ACTION: Motion by Councilmember DeMaio, second by Chair Faulconer, to recommend the City Council:
a. Amend the San Diego Municipal Code in a manner consistent with the proposal’s new municipal code section 26.2003(d), related to the City Auditor.

b. Amend Municipal Code Section 26.2001, titled, “Purpose and Intent,” to read:

“It is the purpose and intent of the City Council to establish the Independent Rates Oversight Committee (IROC) to serve as an official advisory body to the Mayor and City Council on issues relating to water and wastewater system management. The goal of IROC is to ensure that rates charged to City residents are appropriate and the funds generated from rates are used appropriately. By establishing IROC, the Mayor and City Council seek a water and wastewater system that is efficiently and effectively managed.”

c. Make these amendments prior to any consideration of a rate increase in the water and wastewater system.

d. Ensure the City Auditor’s annual independent performance audits on water and wastewater systems do not affect the City’s general fund by funding audits through the Water and Wastewater departments’ Dedicated Reserve from Efficiency and Saving (DRES) fund or by appropriating funding annually from the Water and Wastewater departments’ budgets.

SDCTA’s Sean Karafin kindly shared with me the precise wording of Carl DeMaio’s motion in the above item:

“I would make a motion that we move this proposal to the City Council with recommendation that they amend the San Diego municipal code in a manner consistent with what the Taxpayers Association has suggested under item ‘d’ and the amendments to the purpose section, that I read for the record and I will be happy to provide our City Attorney here with my notes*, and that we make recommendation from the Audit Committee to the City Council that these amendments be made prior to any consideration of a rate increase in the water and wastewater systems.”

At some point after the abovementioned Audit Committee, SDCTA apparently made some revisions to their February proposal and presented the new version at IROC’s March 19 meeting. SDCTA’s President and CEO Lani Lutar and Economic Policy Analyst Sean Karafin’s discussion also included this Powerpoint presentation that was apparently intended to simplify matters by drawing comparisons between specific wording in the existing ordinance juxtaposed above the proposed changes.

The proposal implies that IROC was budgeted $100,000 each year to pay for performance and financial audits and that no financial audit has been performed. However it should have been noted that the Independent Budget Analyst report stated that it wasn’t until April 12, 2010 that funds for utility performance audits were made available to the city auditor.

The SDCTA proposal also seeks to eliminate some expertise requirements for committee members, and further appears to reduce IROC’s independence by requiring it to submit an annual work plan for approval by the Natural Resources and Culture Committee (NR&C).

With great concern about the proposal, IROC called a rare (and possibly the first one ever) special meeting on Monday to discuss the San Diego County Taxpayers Association proposal

SDCTA Economic Policy Analyst Sean Karafin was present to take questions, but he mostly got an earful of criticism.

Andrew Hollingworth was perhaps the only committee member in full support of the revised ordinance. He also added “I think it also appropriate to consider the language of the mayor’s intent in establishing IROC… I believe the taxpayers association have language here which was the original press release establishing IROC.”

Jim Peugh replied: “I guess the City Council passed the ordinance, so I’m not particularly concerned with what the publicity was. I think we need to work just with the ordinance that was passed by the council.”

Irene Stallard-Rodriguez said: “I like some portions of what they’re recommending, there are some good portions that are good, I don’t think all of it is bad, I just don’t think all of it is appropriate, there are one or two things that are good [e.g., deleting the reference to the city manager which no longer exists; and clarifying that water and wastewater departments are now combined]. But the rest of it is like, “you’re kidding.”

Don Billings: “I think there are two issues here; there’s some things that to my surprise were taken to audit and some to city council…which is not just technical changes. It’s a substantial narrowing of IROC’s charter which in my view strips IROC of its ability to examine most of the major factors that track rates and I think it’s foolish…. We wouldn’t be able to look at a lot of the things that drive rates. It’s a caricature of oversight. If you go into the foyer here and look at the mission of the department, it’s about public health and welfare, it’s about water reliability and sustainable supplies, and long range planning and making sure not just that we execute current projects efficiently, which is very important, but it’s so much more than that.”

Gail Welch: “I’ve spent a great deal of time in the finance committee and feel we’re making progress in the finance committee…it seems the charter we have now is a good framework.

Also, Pat Zaharopoulos, President and Chief Executive Officer of the Middle Class Taxpayers Association spoke briefly during public comment. “The present ordinance seems to be broadly written to allow IROC to be independent…the cost of services need to consider the long-range assessment of capital and department operations and infrastructure and many factors to be properly determined. You can’t look at only one variable only and limit you to rates without tampering with your independence and ability to act logically. We oppose the proposed amendment.”

Deputy City Attorney representative Tom Zeleny who attends all IROC meetings as a legal consultant pointed out that the proposal to eliminate certain areas of expertise by committee members would probably mean that some members of IROC would have to be removed.

Zeleny also mentioned what he called a “loophole” in the wording of subsection F of the SDCTA proposal. The proposed wording in that section is so similar to the original wording, Zeleny said, “if the intent is to narrow the focus of IROC, subsection F essentially opens everything up again. A lot of what is considered policy can also be considered a question of cost efficiency. There is simply too much overlap between policy, cost effectiveness, and efficiency. I’ve explained this to the taxpayers association.” He added that he expects SDCTA to reword the proposed revision to eliminate the “loophole.”

When SDCTA’s Sean Karafin had an opportunity to comment, he said “our intent is not really to limit IROC, it’s to focus IROC. There is a significant difference, because if you spread yourself too thin and comment on other [important] sections. But more than anything taxpayers were promised oversight of the expenditures of ratepayer funds…that promise should be met first and foremost.”

Andrew Hollingworth, following up, asked, “Mr. Karafin, is it your intent to basically narrow the focus of IROC so that it serves the mayor’s intent that IROC be the ratepayer watchdog and that the taxpayer’s association perception is that it [IROC] spread out in doing all these other things so that mission has been lost?”

Mr. Karafin: “Exactly.”

It was clear, however, that a solid majority of IROC members were dismayed by the SDCTA proposal.

Irene Stallard-Rodriguez soon declared “I move that IROC oppose the taxpayer association proposal.” Don Billings seconded the motion.

As discussion began, Andrew Hollingworth charged that “several ratepayer proposals I’ve made have been quashed over the years. For example, this year one of the reviews I proposed was to compare rates among other local agencies and that was quashed.”

Don Billings responded: “Let me take exception to that because it has a specific legal definition of “quash” and I’m sure there are no motions to quash in the record. With respect to, for example, the idea of benchmarking, that’s the very first thing we did when we went to [HDR?] engineering and we spent a lot of time examining the question of benchmarking and educating ourselves and discovered that as anybody who does benchmarking knows, rankings are the beginning of the analysis and not the substitute for the analysis. Secondly, unfortunately they get misused. We have to be very careful how we do it…we don’t support “Lone Rangers”, we want it to be done properly and have credibility and far from “quashing” any such effort we asked to be part of that effort. To have it explicitly brought to the Finance Committee to talk about how we identify peers
so we do it carefully, how we identify the metrics so that we do it carefully and properly.”

Gail Welch added, “I go to all the finance subcommittees — in fact I go to all the subcommittees — and there is a lot of focus on rates and costs…there are costs related to everything and that is a main theme. When it comes to benchmarking, I’m not opposed to benchmarking but I think we need to understand who we benchmark against, how one utility is run vs. another and what the layouts and geographics vs. ours are and whether it’s even meaningful to compare us to the people you’re comparing us to.”

Don Billings then said “I’d like to call the motion.”

Jim Peugh: All in favor: all members present voted eye, except Andrew Hollingworth who voted to oppose.

How to handle next steps was then discussed. The consensus seemed to be that a letter to the Mayor and City Council simply stating a rejection of the proposal would not be helpful; rather that the letter should not only to state the rejection of the proposal but also outline the concerns and reasoning for the vote.

Don Billings suggested one way to frame the letter:

“We feel we have been operating in accordance with the ordinance. Indeed most of what we look at is financial. We feel the proposed ordinance would turn IROC into a political tool. How did we get involved in embarking on all these rate increases? Because prior city councils didn’t have the courage to tell ratepayers the truth that we have to fix things. Any jackass (pardon the language) can tell the public that we can cut the budget by 10% but a broader understanding of the entire process is necessary to protect ratepayers. Audits and appropriate benchmarks are necessary, but IROC needs an informed view by looking at management of resources and long-term planning, and this proposal doesn’t let us do that. Risk management, how to invest, having a qualified workforce, essentially all the things that come before the department. It also prevents us from looking at things outside of PUD, since many functions that affect rates are performed by agencies outside of PUD.”

As for the proposed workplan in coordination with NR&C: he added “we can certainly create our own work plan, but it shouldn’t be approved by political committee — or we won’t be independent.”

Andrew Hollingworth immediately countered, “I would strongly oppose any proposal to adopt a workplan that was not adopted by NR&C in consultation with IROC.”

Jim Peugh replied, “In that case I guess we could call it the “Dependent Rates Oversight Committee.”

Following more discussion in the same general tenor, Michael Ross moved for Jim Peugh (in collaboration with Gail Welch) to write a letter to the mayor and city council explaining that IROC believes it has operated according to the ordinance and translate the committee consensus as to why it opposes the SDCTA proposal.

Tom Zeleny then stated that assuming there would not be a future meeting to discuss the particulars of the letter, it would be be advisable to decide at this meeting what should be said in the letter.

So discussion ensued about what particulars should be included in the letter. Some committee members referred to notes they had prepared following the Monday presentation in suggesting wording they thought should be included in the letter.

This discussion greatly displeased Andrew Hollingworth who angrily rose and announced his intention to leave the meeting, saying that discussion of items to include in the letter has “obviously been orchestrated.”

Nearly everyone asked him to stay, saying they wanted to hear his opinions and that they certainly had not coordinated their written topical lists –that today was the first time anyone had discussed them. Briefly, Hollingworth sat back down but after a few more minutes of discussion, he appeared increasingly agitated and growing red in the face. Again he abruptly rose, announced that “IROC’s problem all along is that it hasn’t focused on ratepayers” and then he left the room for good.

As to the question of the proposed workplan, a consensus developed as to a willingness to internally develop a workplan within the committee, but to have one developed and/or approved by the Natural Resources and Culture Committee was unacceptable.

Don Billings again phrased sentiment that seemed to satisfy the committee members: “I think it [the SDCTA proposal] completely misses the point of what IROC is about, to have political approval of what we’re going to look at and what we’re not going to look at. A big reason we get into problems in this city and in managing the public health and welfare is because there’s no buffer from the political interference that prevents the professional managers from managing this operation professionally. To me that’s an essential part of my job on IROC…it’s to call it as I see it and not go into NR&C and ask for instructions. We can create our own work plan but there’s no reason to have one approved by NR&C. IROC’s essense is its independence.”

Electioneering with claims that everyone’s being drastically overcharged for water fuels emotional public sentiment but doesn’t change the fact that it costs money to import water and to responsibly manage our meager local water supply and deteriorating infrastructure. Like police and fire, San Diego’s water supply is a serious public health and safety issue.

 

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San Diego city audit calls for improved water/wastewater management

Posted by George J Janczyn on October 19, 2011

[new headline; the old one confused people]

An audit of the San Diego Public Utilities Department (PUD) Capital Improvement Program (CIP) was received on Monday Oct. 17 by an approving Independent Rates Oversight Committee (IROC). The report, performed at IROC’s request and prepared by the Office of the City Auditor (OCA) issued four broad findings with 18 recommendations.

PUD is responsible for the city’s water and wastewater systems.

Erin Noel, Performance Auditor at the City Auditor’s Office, presented the report to the committee, provided additional background, and answered questions.

The report summarized: “Steps have been taken to implement asset management and planning, but improvements are needed to more effectively manage projects.

Among the areas for improvement noted:

  • Public Utilities has assessed the physical condition of many above-ground assets, but has only assessed about one percent of its water transmission pipes.
  • Public Utilities has developed three master plans to address capital needs — the Water Facilities Master Plan, Draft Metropolitan Wastewater Plan, and Municipal Wastewater Collection System Master Plan — but only the Water Facilities Master Plan is comprehensive and in-line with best practices.
  • For smaller projects valued between $100,000 and $2 million, the City’s average delivery costs are 14 percent higher than the statewide average of 33 percent.

(Findings are also summarized in an OCA highlights sheet.)

Of particular interest to IROC members, in addition to the report’s findings, was “Management’s Response to Report Recommendations” submitted by PUD Director Roger Bailey. While management agreed with most recommendations, it disagreed with several, especially with regard to process changes in recommendations #16 and #17, with management indicating that other processes already in place can or do accomplish the same things.

As committee members questioned Ms. Noel about the disagreements, she indicated that it wasn’t really the Department that disagreed with the recommendations, the objection came from higher up “in the administration” (i.e., Mayor’s Office). The outcome then, is a difference of opinion between OCA and the Mayor’s Office as to whether the recommended steps are already being done.

When members asked how the standoff would be resolved, Ms. Noel indicated that a followup process will take place in Nov-Dec, and that the issue would also likely go before City Council, possibly in January.

Overall the committee was impressed by the auditor’s view on the disputed issues. Initially Andrew Hollingworth moved to “accept” the report, but Colin Murray suggested that “support” would better convey the committee’s interest in the auditor’s position. Revised motion moved (Murray), seconded (Don Billings), and passed unanimously. Committee Chair Jim Peugh later said “I think the auditor’s report made a lot things clearer and I hope we can build on the information that was in the report over the next year.”

Click here for the complete audit report. Below are the slides from Ms. Noel’s briefing to the committee:

 

Posted in Independent Rates Oversight Committee (IROC), San Diego Public Utilities Department (PUD), Water | Tagged: | Leave a Comment »