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By Gig Conaughton
North County Times
November 26, 2006
SAN
DIEGO ---- The costs on $3 billion worth of water projects
have shot up beyond expectations. At the same time, San Diego
County water officials don't think they'll have as many people
as they once expected to pay for those projects ---- because
population and water-demand projections have shrunk.
The combination of those two things could mean that water
bills for local ratepayers will be going up.
However,
regional water officials said last week that they hope to
avoid that.
A number of San Diego County Water Authority leaders said that
even if the agency's water prices shot up faster than planned,
homeowners would hardly feel it, because their prices are only
a "piece of a piece" of homeowners' retail water
bills.
But officials from the Water Authority ---- the regional
wholesale agency that supplies nearly all the water that
county residents use by selling it to cities and retail
agencies ---- said they plan to start wrestling with ways to
rejigger their project plans to evade rate "spikes"
when they meet Thursday.
"I think it's just a reality check," said Gary Arant,
Water Authority board member and Valley Center Municipal Water
District general manager. "An opportunity to get a real
quick look at the capital improvement program, and to look at
... what level of reliability we want to supply to the
region."
The problem is, Water Authority officials approved that
laundry list of capital improvement projects that included
building and raising dams, linking reservoirs to create an
"emergency storage project," and building a $170
million water treatment plant, because they thought it was the
best way to guarantee that county residents have all the water
they need into the future. Cutting, and-or delaying, projects
may be difficult for board members.
One project that could be slashed from the list is the $669
million set aside for a Carlsbad plant that would turn
seawater into drinking water ---- a project that the Water
Authority backed away from in July, but still has on the
capital improvement budget.
Meanwhile, the Water Authority's deputy general manager, Paul
Lansperry, said rejiggering the projects list could entail
juggling when the projects might be built, rather than cutting
them ---- using delayed start times to stretch the financing
of those projects over a longer period.
Things have changed
Just two years ago, the Water Authority was looking at an
ambitious $3.106 billion list of capital improvement projects
and was feeling comfortable about how those projects would be
financed.
It was the largest, most ambitious project list in the
agency's history, and punctuated what had been a decadelong,
dramatic change in the Water Authority's personality.
For most of its 59-year history, the Water Authority was
basically a "pipeline" agency. It was content to buy
water from Los Angeles-based Metropolitan Water District, tack
on a shipping charge, and sell and deliver the water to 23
cities and retail agencies in the county through the Water
Authority's 270 miles of pipelines.
But that changed dramatically in the 1990s. Seeking to reduce
its "overreliance" on Metropolitan and give county
residents a more "reliable" water supply, the Water
Authority in October 2003 worked out a historic deal to buy
billions of gallons of water a year from Imperial Valley
farmers ---- a deal now in year four of a 35-year contract.
It also started its capital improvement plans: the emergency
storage project to give the county a six-month water supply;
its first $170 million water treatment plant; canal-lining
projects in Imperial Valley that would bring county residents
billions more gallons of water a year for the next 110 years.
But in 2006, the cost of the original $3.106 billion capital
projects list has jumped nearly 11 percent, by more than $326
million, to $3.433 billion. And John Economides, the Water
Authority's director of engineering, said the capital
improvement project budget is likely to increase by another
$27.25 million for increases to the San Vicente pump station
---- a project that would be used to pump water from the San
Vicente Reservoir to other reservoirs as part of the emergency
storage project.
Lansperry said a big reason for the increased projects cost
was that the costs for steel, concrete and copper ---- the key
building components for water projects ---- have increased
beyond expectations during the last two years. However,
Economides said the increases were also partly due to the fact
that the Water Authority has increased the size of some
projects, such as expanding the San Marcos water treatment
plant's production from 50 million gallons a day to 100
million gallons a day.
Complicating the cost picture, the Water Authority now
projects that it will be selling a lot less water in the
future ---- and generating less revenue to pay for the
inflated capital project's list ---- than it thought just two
years ago.
In 2004, the Water Authority used San Diego Association of
Government population projections to estimate that by 2030,
the region's thirst for water would be roughly 884,000
acre-feet a year. An acre-foot of water is 325,900 gallons,
enough to sustain eight people ---- two households ---- for a
single year.
But the association changed those population estimates in May.
Now, Water Authority officials say they expect 2030 demand to
be about 829,000 acre-feet, 55,000 acre-feet a year less than
they thought in 2004. That changed demand pattern also means
that the Water Authority will sell incrementally less in each
year between now and 2030 as well, meaning it will earn less
revenue than originally projected for decades.
Sea still a big question
Again, the first thing that Water Authority board members are
likely to consider doing to change the capital improvement
projects list when they meet this month is to lop off the $669
million they allocated to building a Carlsbad plant that would
turn seawater into drinking water.
But officially cutting the final ties to that project would
open new questions.
What role does seawater desalination play in the Water
Authority's future?
Just two years ago, the Water Authority was pronouncing
seawater desalination as "critical" to San Diego
County's future water supply. Officials said it would give
county residents their first "drought-proof,"
locally controlled water supply.
In 2000, a Connecticut-based private company, Poseidon
Resources Inc., started studying the idea of building a plant
to turn seawater into drinking water at Carlsbad's Encina
Power Station. Officials said the power plant was the perfect
spot for a seawater desalination facility because it already
had access to seawater ---- water being used by the power
station to cool electricity-generating turbines ---- and had
plenty of power to pump seawater through salt-extracting
filters.
The Water Authority started negotiating with Poseidon in 2001
to take part in the project, with the idea of letting Poseidon
build the plant, and then buying it from the company, and
using it to churn out 50 million gallons of drinking water a
day.
But the on-again, off-again negotiations were often testy.
Water Authority officials said Poseidon wanted too much money.
Poseidon officials said the Water Authority wanted to cut them
out of the deal.
In July, the Water Authority abruptly quit, and said it was no
longer interested in the Carlsbad plant. Poseidon is still
pursuing building the plant, with the city of Carlsbad as its
principal partner.
Last week, Keith Lewinger, a Water Authority board member and
Fallbrook Public Utility District general manager, said it was
a no-brainer for board members to subtract the $669 million
set aside for the Carlsbad project out of the Water Authority
capital improvement budget.
Lewinger was asked if the board might keep the funding in the
capital improvement projects budget ---- because the agency
had identified seawater desalination as a "critical"
piece of future supplies, and because the Water Authority is
still studying whether other desalination projects could be
done at the San Onofre nuclear power plant, and in South
County.
Lewinger said no.
"We don't do 'place-holders,' " he said.
Where now?
But if the Water Authority successfully pares its swelling
capital projects' budget by canceling that $669 million for
seawater desalination ---- would board members be willing to
add a multimillion-dollar project back into the budget in the
future?
Or would it mean the Water Authority would now turn its back
on seawater desalination? And would that mean turning back to
the Metropolitan Water District, and shifting more of the
county's reliance upon its supply? That could be done by
pushing faster on another capital project ---- building a
pipeline connection to Metropolitan, Pipeline Six, a project
that the Water Authority has been pushing off for several
years.
Ken Weinberg, the Water Authority's water resources manager,
said last week that those are questions that Water Authority
board members are going to have to wrestle with starting
Thursday.
"Those are the kinds of things we're going to have to
discuss ---- what is the supply mix we can count on?"
Weinberg said.
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