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Archive for the ‘Water rates’ Category

Proposed changes to City of San Diego water rates

Posted by George J Janczyn on July 21, 2015

The Public Utilities Department delivered on Monday, July 20 a presentation to the Independent Rates Oversight Committee (IROC) showing proposed water rate changes for the City of San Diego. Here are selected slides from that presentation. For further details, see also this San Diego Union-Tribune article For slightly larger pictures click slide images.

ProposedRateIncrease
WaterConsumptionAndMeter
SingleFamily
OtherClasses
Comparisons
RecycledRates

Posted in Recycled water, Water, Water rates | Leave a Comment »

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

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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 water rates and charges after completion of the Carlsbad desalination plant

Posted by George J Janczyn on July 16, 2012

The San Diego County Water Authority held a special board meeting July 12, 2012 to hear a discussion about a possible framework to guide how San Diego County water agencies could be charged for water when the Poseidon Carlsbad Desalination Project is complete.

One question for the City of San Diego (which buys only untreated water and will not receive desalinated water) is how much it will nevertheless be required to contribute to the project’s expense.

Listen in and watch here.

Audio part 1

Audio part 2

 

(view as PDF)

Twitter:

 

To be continued at the next SDCWA board meeting scheduled for July 26.

 

Posted in Desalination, Poseidon Desalination Plant (Carlsbad), Water, Water rates | 1 Comment »

Water rates and the cost of providing service in San Diego

Posted by George J Janczyn on June 26, 2012

Periodically water and wastewater rates paid by San Diego residents becomes a hot topic and with November elections drawing nearer the issue is certainly going to get more coverage, much of it political, in the press. But if you want to truly understand water rates you need to look beyond the surface rhetoric of politicians (recall one mayoral candidate who said he can cut rates by 15% and freeze them that way for five years) and press reports that sometimes inflame more than inform.

Nobody likes to see water rates go up but the City of San Diego’s unique geographic and climate characteristics make expensive water inevitable since most of it has to be imported from great distances. Relying on distant water sources also makes San Diego vulnerable to supply reductions from those sources (Colorado River and Northern California) and potential disasters that could cut the supply entirely for an extended period of time.

Reducing dependence on water imports by developing more local supplies through water recycling and potable reuse is expensive.* Protecting against potential supply cutoffs by increasing local storage capacity is expensive. Water conservation is the most cost-effective means of reducing demand for imported water to the extent that people are willing to conserve. In general, these things are understood by informed residents. What’s not well understood yet is what may happen to water rates in the future.

*(although the City of San Diego doesn’t plan to purchase desalinated water in the foreseeable future, if the Poseidon plant in Carlsbad deal with the County Water Authority (CWA) comes together the city will, however, be required to pay a certain percentage towards that project as part of the cost of being connected to CWA’s infrastructure)

Politics aside, for a better understanding of issues underlying water rate structure there is useful information out there: the 2010 Urban Water Management Plans for the City of San Diego and for San Diego County; the city’s 2011 Recycled Water Master Plan and Recycled Water Study. There’s also the city’s new Comprehensive Water Policy that was implemented following a drive by city councilmember Sherri Lightner to update the city’s old and sometimes conflicting policies.

More immediately, the city has contracted with Black & Veatch (a global engineering, consulting, construction and operations company specializing in infrastructure development) to conduct a Cost of Service Study.

The information and recommendations that will result from this study, due to be completed around the end of the year, will play a large role in determining water and wastewater rates in the coming years.

A very good presentation on how this new study will help determine a new rate structure for San Diego was given at the June 18 meeting of the Independent Rates Oversight Committee.

You can listen to the presentation (including an interesting Q&A afterwards) and view the Powerpoint slides just below.

The presentation was given by Black & Veatch Director Ann Bui, Principle Consultant Brian Jewett, and Patricia Tennyson from Katz & Associates. Thank you to IROC representatives Ernie Linares and Monica Foster for their assistance in securing permission for me to record a copy of the presentation. Apologies for a few seconds of interference about halfway through the recording:

Audio: http://groksurf.org/Sound/WaterCostOfServiceStudy.mp3%20

 

Slides:

 

Posted in Independent Rates Oversight Committee (IROC), Water, Water rates | Tagged: , | Leave a Comment »

Grand Jury’s water rates report is ‘right on the money’

Posted by George J Janczyn on July 28, 2011

[Reprint of a news release from the San Diego County Water Authority]

On June 28, [sic; i.e., July 28] the San Diego County Water Authority Board of Directors largely concurred with the key findings contained in the May 31 San Diego County Grand Jury report, “San Diego County Water Rates: High Today, Higher Tomorrow”. The report determined that the region’s water rates are likely to continue to rise, that underrepresentation on the Board at Metropolitan Water District of Southern California (the Water Authority’s largest imported water supplier) harms the interests of the region’s ratepayers, and the region’s water agencies have not clearly communicated why water rates are rising.

The Board determined the Water Authority has implemented or is implementing the report’s recommended actions for developing new local water supplies, pushing for fair representation at MWD, and improving public outreach.

The Water Authority also offered clarifications on two of the report’s findings related to water rates.

  • The increasing cost of water and transportation service from MWD today remains the largest driver of rate increases in San Diego County. The need to develop new local supplies, and thus incur those costs, is not being driven principally by the needs of growing population or development. Instead, it is driven by uncertainties surrounding the future availability of imported water from MWD.
  • Effectively communicating information about water rates is often difficult to do quickly and easily. Obstacles include the inherent complexity of region’s water supply and rate-related issues, constantly changing hydrological conditions that affect supplies and rates, and varying rates among the region’s local retail agencies. Nevertheless, the Water Authority acknowledged the need for clear communications is increasing and that it is working to enhance its outreach efforts.

For more details on the Grand Jury’s report and the Water Authority’s response, please click on the resources below.

 

Posted in San Diego County Water Authority (SDCWA), Water, Water rates | 2 Comments »

The unsettled water rates in San Diego

Posted by George J Janczyn on July 19, 2011

San Diego’s most recent water rate hike last March happened because the Metropolitan Water District of Southern California (MWD) raised its water rate to the San Diego County Water Authority (SDCWA) which in turn raised the water rate for county water agencies that it supplies (including the City of San Diego). San Diego, of course, typically needs to import 85-90% of its water so it doesn’t have much recourse.

As a result, the City Council reluctantly approved a “pass-through” water rate increase for City customers effective March 1 to cover the SDCWA rate hike. The Council also sought to exert some pressure on MWD.

The perceived pressure point was SDCWA’s lawsuit against MWD charging that it illegally inflates the price of water for San Diego County. The City naturally supports that position so when approving the pass-through increase the City Council asked the City Attorney to recommend whether the city should join SDCWA’s lawsuit against MWD, and also asked the Mayor’s Intergovernmental Relations Department to develop a recommendation for seeking state legislative support for auditing MWD pricing practices.

Here we must note that an underlying issue in SDCWA’s lawsuit against MWD is that in addition to buying water from MWD, SDCWA buys Colorado River water from Imperial Valley as part of the Quantification Settlement Agreement (QSA). However, there are no water pipelines from Imperial Valley to San Diego so SDCWA needs to pay MWD to capture Imperial Valley’s water upstream at Lake Havasu and transport it through the Colorado River Aqueduct to San Diego’s pipelines.

MWD’s charge to transport that water (wheeling charge) is a big deal. SDCWA says MWD illegally inflates the wheeling charge with expenses unrelated to the Colorado River Aqueduct (e.g., costs associated with obtaining State Water Project water from Northern California).

The disagreement over water transport pricing is an old issue that was already evident when the QSA was enacted in 2003. The Record of Decision actually memorialized that “…MWD and SDCWA do not agree on the nature or scope of rights to the delivery, use or transfer of Colorado River water within the State of California.”.

So when MWD and SDCWA signed their agreement for transporting the water, the contract included a provision that “after conclusion of the first five years, nothing shall preclude SDCWA from contesting in an administrative or judicial forum whether such charge or charges have been set in accordance with applicable law and regulation.”

Which is exactly what SDCWA is now doing with its lawsuit.

Meanwhile, on another front around that time, MWD had been developing incentive agreements to provide rebates and subsidies for local conservation and recycled water programs. Those programs are funded through MWD’s Water Stewardship Rate fee charged to all MWD member agencies.

Here’s where MWD got tricky: in 2004 MWD adopted so-called Rate Structure Integrity (RSI) language in the Water Stewardship agreements to the effect that if a member agency “files or participates in litigation or supports legislation to challenge or modify Existing Rate Structure…Metropolitan may initiate termination of this Agreement.”

So, after MWD refused to modify its wheeling charge and SDCWA filed suit, in response MWD recently exercised its option to terminate support for some of the San Diego County programs. It partially retained a few residential and commercial agreements but decided against implementing larger agreements including funding for a San Vicente Recycling program in Ramona and a subsidy for the Poseidon Desalination Project in Carlsbad.

How would that affect the City of San Diego? At an Independent Rates Oversight Committee (IROC) Environmental & Technical Subcommittee meeting on July 10, Cathy Pieroni, Principal Water Resources Specialist for the Public Utilities Department reported that MWD’s Water Stewardship cuts would not impact existing MWD contracts with the City and that the City could still potentially obtain MWD funding for up to $250/AF for Indirect Potable Reuse (IPR) water if the Water Purification Demonstration Project materializes as a full-scale operation.

As for the City Council’s request that the City Attorney investigate possible legal action that could be taken to apply pressure on MWD over the rate hike issue, City Attorney representative Tom Zeleny said that his office will likely recommend against legal action, saying it “would probably not be cost-effective.” He said the official report from his office will be on the August agenda for the City Council’s Natural Resources and Culture Committee.

On the issue of the Council’s request to the Mayor’s Intergovernmental Relations Department, it appears the Mayor may have influenced Assemblyman Nathan Fletcher to introduce AB 779 relating to establishment of water district oversight committees. Faced with opposition (including MWD’s considerable influence), at the last minute Fletcher pulled the bill from its scheduled hearing indicating he would make it a two-year bill and proceed later.

MWD’s opposition to Fletcher’s bill can be seen in its May 16 board meeting minutes where it revealed its suspicion that AB 779 was related to the San Diego City Council’s desire for legislative intervention over MWD water rates:

“There is speculation, however, that AB 779 might be amended and used as a legislative vehicle to assist the San Diego County Water Authority (SDCWA) in its lawsuit against the Metropolitan Water District of Southern California (Metropolitan) which challenges Metropolitan’s water rates and charges. A judicial victory by SDCWA would result in a significant increase in the cost of water for Metropolitan’s customers outside SDCWA’s boundaries. The rationale for this speculation is based on a memorandum circulated by the San Diego City Council after the filing of the lawsuit that details potential parallel strategies regarding the issues addressed in the lawsuit. These strategies included seeking a Joint Legislative Audit to perform a financial audit of Metropolitan as well as sponsoring legislation to create an Independent Rate Oversight Committee for MWD to evaluate the price charged for water as well as operations.”

So for the time being AB 779 is stalled and prospects are uncertain, it doesn’t look like the City will pursue legal action, and other legislative initiatives seem iffy.

Instead, for the short term, the City will try to “absorb” the SDCWA rate increase announced for next fiscal year: Mayor Sanders has proclaimed that the City won’t raise water rates next fiscal year. Instead, he wants the Public Utilities Department (PUD) to take the hit from the higher expense.

Discussing the Mayor’s announcement at yesterday’s IROC meeting (July 18), Assistant PUD Director Alex Ruiz said the department will find an accomodation because local water supplies increased considerably during the last rainy season. As a result the department figures it can draw “up to” 20,000 AF of local supplies to avoid buying about $8.75 million in imports from SDCWA. The department is also looking at more staffing cuts and creating further “efficiencies.”

Although the action hasn’t been labeled a “deferred” price increase, that’s what it looks like. SDCWA’s higher price isn’t going away at the end of the next fiscal year and there will likely be another price hike announced for the following year as well. So at some point the City will have to cover the higher costs either by passing them on to consumers or by further “absorbing” expenses within the department at some risk to infrastructure and operations. And if you think capital improvement projects, maintenance and repairs, and EPA consent agreement work isn’t piled up already, think again.

Will San Diego have to “catch up” with deferred water rate increases? What’s the risk of drawing down the City’s emergency storage capacity now that it has some water saved? Are we using precious reserves to temporarily defer expenses as a political expedient? And what about popular support for setting water rates that discourage waste? Does artificially keeping rates down send a mixed message about that?

Whatever happens, I don’t think broader public understanding will come from would-be mayors accusing PUD of mismanagement over water rates and saying things like “I pledge to cut rates by 15% and freeze them for five years without any delay in our infrastructure investment and while maintaining the highest standards for water quality.”

 

Posted in Independent Rates Oversight Committee (IROC), Metropolitan Water District of Southern California, San Diego County Water Authority (SDCWA), Water, Water rates | Tagged: | 4 Comments »

San Diego Water Talks: Investing In Reliability

Posted by George J Janczyn on June 1, 2011

San Diego County faces a “new normal” where water is concerned. What’s the new normal? It’s widespread community awareness that we inhabit an arid region, rely on mostly imported water to survive, are vulnerable to supply disruptions from a variety of causes, human and natural, and must use water wisely and sparingly, drought or no drought. It’s aggressive cost-cutting in water agency budgets while continuing to diversify water sources. It’s improving supply reliability. And, the new normal is more rate increases for the foreseeable future.

San Diego County Water Authority headquarters: water-wise landscaping shares the sun with photovoltaic arrays under construction in the parking lot.

Those were some of the points made during Water Talk: Investing in Reliability, a community forum on key water issues facing San Diego County hosted by the San Diego County Water Authority (CWA) at its headquarters on Tuesday evening.

Michael Hogan, Board Chair; Dennis Cushman, Assistant General Manager; and Eric Sandler, Director of Finance spoke to a group of about 50 people.

Mr. Hogan gave an overview of CIP activities and reliability/diversification projects completed or underway comprising part of a long-term strategy arising from the 1987-1992 drought that caused the state to begin strictly rationing water. Projects include additional local storage capacity from the new Olivenhain Dam and the San Vicente Dam Raise under construction, 3 seawater desalination projects, expanded use of recycled water including potable reuse, a water transfer agreement with Imperial Irrigation District, and extensive public outreach to promote a water conservation mindset.

Mr. Sandler said adjusting to “the new normal” means controlling costs to minimize water rate increases, such as: cutting $6 million from the operations budget, reducing the workforce by 12%, making no spot water purchases, selling stored water (reduces evaporation loss, water was purchased earlier at a lower price), and using the rate stabilization reserves. He pointed also to CWA’s excellence in financial reporting and budgeting which earns high bond ratings and keeps borrowing costs low. Nevertheless, infrastructure and operations costs will continue to rise.

Another major contributing factor in higher water rates is the Metropolitan Water District of Southern California (MWD).

While the percentage varies among the 24 CWA member agencies, drought or no drought water comes in a 50-30-20 plan for the county: 50% imported from the Colorado River, 30% imported from Northern California, and 20% drawn from local resources. All of those imports come to San Diego via MWD.

CWA also has contracts to purchase Colorado River water from the Imperial Irrigation District (IID) but there’s no direct pipeline from Imperial Valley to San Diego. Instead the water authority pays MWD to transport IID’s water through the Colorado River Aqueduct and to CWA’s pipelines. The water authority believes it is being unfairly and illegally overcharged by MWD for those water transportation costs (some observers say MWD imposed the high rate in retaliation because San Diego’s deal to buy Imperial Valley water meant it would buy less water from MWD). Consequently, CWA filed a lawsuit in Superior Court charging that MWD’s water transportation rate structure is illegal.

Commenting on the current status of the lawsuit against MWD (it’s being heard in San Francisco Superior Court), Mr. Cushman said that a decision could come in 2012; however, both sides are so firmly entrenched in their positions that regardless of the outcome, there will be an appeal. Therefore, it could easily be another 3-5 years before the matter is settled for good. In the meanwhile, it’s certain that MWD will continue to impose rate increases because demand is down but fixed costs will still need to be paid. CWA, in turn, will have to pass along any MWD increase plus its own increases in fixed costs.

More background on the CWA vs. MWD lawsuit:

Another perspective on MWD is outlined in What We Need in a Bay-Delta Fix, a water authority presentation recently given to California legislators.

Here are CWA summary sheets for issues covered in the forum:

Coincidentally, on the same day as the water forum, the San Diego County Grand Jury announced that water rate increases are inevitable, in its report San Diego County Water Rates: High Today, Higher Tomorrow.

The Grand Jury news release is below. Although it states that the full report is on the county website, as of this writing it’s not there yet. However, the Union-Tribune has a copy of the report.

[Update June 2: the Grand Jury website now has the final report]

 

 

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San Diego water rates to go up in March

Posted by George J Janczyn on December 14, 2010

By now, just about all San Diego city residents should have received a notice of public hearing to be held on January 24, 2011 to discuss a requested water rate increase. The increase is needed to cover the new price of water charged by the San Diego County Water Authority (SDCWA) — the imported water wholesaler supplying the City of San Diego and 23 other member water agencies in the county.

Although SDCWA’s price increase to its member agencies takes effect January 1, 2011, the City’s proposed rate increase would not begin until March 1, so there will be a few months where water rate revenues will be out of sync with what the City has to pay for water. The San Diego Public Utilities Department (PUD) believes it can absorb the difference for a few months, but if the March 1 increase does not take effect, something will have to give.

Many water agencies throughout the county have already approved rate increases for the same reason. In addition, some of them have taken the opportunity to bundle in additional operations and maintenance costs into their rate increases, so they are doing more than simply passing along the increased price of water.

San Diegans are not being asked for those extras. The higher price of the water itself is the only thing residents are being asked to pay for. For single-family residences — the majority of San Diego water customers — the increase will amount to about $0.47 per month. [late clarification: that amount pertains only to the increase in the base fee. The overall increase in the bill can be $3.41 for for up to 14HCF of use — see comments]

San Diego is in the middle of the pack. From the 2006 Water Cost of Service Rate Study

Practically speaking, it looks pretty straightforward and non-controversial. But politically there are complications.

For one thing, it is already known that SDCWA will increase the wholesale price of water again in 2012, so San Diego residents will again be asked to approve a “pass-through” rate increase next year.

For another, the City will eventually need to expand its water capital improvement program (to replace overaged water mains, etc.) and cover other higher costs.

The Public Utilities Department has been engaged in longer-term thinking about the water rate structure and the Independent Rates Oversight Committee (IROC) has been monitoring developments and giving feedback on that topic.

To that issue, yesterday the IROC held a special workshop — a presentation from PUD on the framework for the rate setting process. The nearly two-hour presentation by PUD Assistant Director Alex Ruiz went into detail about the many complex issues involved in designing rates. To list a few of the rate drivers: operations and maintenance; pumps, plants, and pipes; bond coverage requirements; rate affordability; current economy; pensions; trust/transparency; taxes; CIP financing; regulations.

The current rate structure was last overhauled via a four-year capital improvement program in 2007. The 2007 program was based on the San Diego Water Cost of Service Rate Study completed in 2006. FY 2011 is the final year for that program and PUD is now gathering information for a new rate review, with a new cost of service study expected to begin in FY 2012.

Mr. Ruiz also briefly characterized ongoing staff discussions about a future revision to the rate structure possibly incorporating some of the techniques used by the Irvine Ranch Water District for taking household needs into account in a rate structure that encourages conservation and penalizes waste.

Meanwhile, City Councilmember Carl DeMaio is campaigning against the increase by introducing tangental arguments that, especially in the City’s current economic malaise, tend to generate emotional responses. Based on a “white paper” he delivered in September, DeMaio makes charges of “empty promises” and “out of control labor costs” and that “flaws and weaknesses” in PUD’s management and the overall rate structure have not been addressed and therefore (as punishment, I guess) this pass-through increase should not be approved until those issues are addressed.

(Incidentally, while observing the IROC workshop I got to wondering if Mr. DeMaio ever attends IROC meetings. IROC’s administrative support person Monica Foster wasn’t sure how many times, but committee member Gail Welch recalled that did he come to one meeting long enough to inform the committee of his priorities as a councilmember.)

Ultimately, the whole rate structure issue can appear to boil down to this dynamic between costs and rates: on the one hand you can total the costs and then calculate what rates should be to pay for them; or you can determine what ratepayers can afford to pay and then decide which costs can be funded with that amount. Somewhere in that mix is the answer.

The immediate rate increase bypasses those difficult issues for the time being. Carl DeMaio’s diversions notwithstanding, the question is simply whether we’re willing to cover the commodity cost of water that the City has to pay SDCWA.

For further information, here’s a report by the San Diego Independent Budget Analyst (see also the City Auditor’s review of calculations used for the proposed increase).

 

Posted in Independent Rates Oversight Committee (IROC), San Diego County Water Authority (SDCWA), Water, Water rates | Tagged: , | 6 Comments »

San Diego water rate increase upcoming topic for City Council

Posted by George J Janczyn on November 15, 2010

An update on the Public Utility Department’s proposed pass-though water rate increase for 2011 was given at today’s meeting of the Independent Rates Oversight Committee (IROC). PUD is requesting to pass along water rate increases that it will have to pay the County Water Authority starting in 2011 (because CWA is passing on the rate increase imposed on it by the Metropolitan Water District of Southern California).

The request was already heard by the NR&C Committee and forwarded to the City Council without recommendation (item 5). The Council will be asked to approve Proposition 218 Noticing of recommended rate increases and set a public hearing date.

PUD’s Assistant Director Alex Ruiz supplied the timeline for the next steps:

  • Nov. 29: On the docket for City Council meeting at 2pm
  • Dec. 8 or sooner: Proposed mailing of notice and announcement of public hearing
  • Jan. 24: Proposed public hearing date
  • Mar. 1: Proposed effective date of increase

Here’s the request documentation (with background); includes a sample public notice and other background (the exact pricing data that appear on the sample public notice are not accurate–they have since been revised upwards slightly due to incorrect information previously obtained from CWA).

Note that an earlier temporary rate increase for the IPR Demonstration Project is expired and is no longer being charged.

In other news, PUD’s Director Roger Bailey submitted a status update on the PUD action plan response to IROC’s 2008 Annual Report, which includes the latest on the IPR Demonstration Project. Also, IROC continues to discuss the issue of low-income ratepayer assistance with PUD; the PUD’s Recycled Water Study is expected to be completed by the end of December; and the committee will slightly increase its meeting time beginning January 2011.

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