Transcript Slide 1

Southern California
Agricultural Water Team
Agricultural Water Summit
November 12, 2008
Escondido, CA
Overview
 Introduction
− Interim Ag Water Program Background
 Water Supply Conditions
− Storage Conditions/2009 Outlook
 MWD IAWP Revisions
− Phase Out
− Opt-Out/Ag Conservation Program
− SDCWA Special Ag Water Rate
 Decision Support
− MWD Shortage Allocation Plan
− MWD Rate Projections
 Questions
MWD Ag Water Sales History
 MWD deliveries for agriculture started in 1958
 1991 MWD and CAC develop a water rate that
recognizes the difference in water rates based
on supplemental water use
 Plan allows growers a fixed rate reduction in
exchange for recognition of their use of
supplemental water and the ability to be
interrupted ahead of M&I users
 1994 saw the program gain permanency and
the IAWP (Interim Agricultural Water Program)
was born through the efforts of the CAC
Interim Ag Water Program History
 MWD and its member agencies utilize the IAWP to increase water sales
and sustain Agriculture in Southern California through the 1990’s and
into the 21st century
 2006 – Federal Court Judge Oliver Wanger orders the California
Department of Water Resources to restrict pumping from the Delta
during certain critical times pursuant to the Endangered Species
Act to protect to the Delta Smelt - known as the Wanger decision
 This restriction caused MWD to alter their water import amounts
and look for alternative water resources to meet the demands
 MWD acquires water transfers at a net cost of  $250/AF
 One of the resource actions that MWD used to balance the water
resource need was to ask IAWP users to reduce water use by 30%
 Not only did Ag comply with the request, but sustained it for all of 2008
IAWP/Long Range Finance Plan
 In August of 2007, CAC and their Southern California
Agricultural Water Team (SCWAT) recognized that the
Wanger decision would have lasting and devastating
affects on the IAWP
 SCAWT, through their consultant, requested a
meeting with MWD staff to see if a change could
be made in the IAWP to reduce the impacts on Ag
 MWD staff was willing to look at alternatives and
for the next 10 months, worked with SCWAT and
their consultant to formulate an alternative program
 MWD and SCAWT recognized that as a result of the
Wanger decision, that supplemental water would not
be available in Southern California in the near term
MWD Supply Impacts
Average Annual Supplies
-950K
Water Supply
Conditions
California Water - 2008
Below normal deliveries
Coming out of an 8-year
drought
Los Angeles
Aqueduct
Colorado River
Aqueduct
State Water
Project
Local
Below normal
rainfall
Fishery conflicts cause
cutbacks & 2-yr drought
Lake Oroville Storage Level
4,000,000
3,500,000
Reservoir Capacity - 3,537,600
2,500,000
Lowest End-of-Oct
Storage Level Since 1977
2,000,000
1,500,000
1,000,000
500,000
Current Storage Level = 1.03 MAF (29% of capacity)
-08
July
Jan u
ary- 0
8
-07
July
Jan u
ary- 0
7
-06
July
Jan u
ary- 0
6
-05
July
Jan u
ary- 0
5
July
-04
0
Jan u
ary- 0
4
Acre-feet
3,000,000
San Luis Reservoir Storage Level
SWP Share
1,400,000
1,200,000
SWP Capacity - 1,062,000
800,000
600,000
400,000
200,000
Current Storage Level = .147 MAF (14% of capacity)
-08
July
Jan u
ary- 0
8
-07
July
Jan u
ary- 0
7
-06
July
Jan u
ary- 0
6
-05
July
Jan u
ary- 0
5
July
-04
0
Jan u
ary- 0
4
Acre-feet
1,000,000
Diamond Valley Storage Level
900,000
Reservoir Capacity - 810,000
700,000
Lowest Storage Level
Since Reservoir Fill
600,000
500,000
Current Storage Level = .45 MAF (56% of capacity)
400,000
-08
July
Jan u
ary- 0
8
-07
July
Jan u
ary- 0
7
-06
July
Jan u
ary- 0
6
-05
July
Jan u
ary- 0
5
July
-04
300,000
Jan u
ary- 0
4
Acre-feet
800,000
MWD Storage Conditions
~2.2 MAF
~ 1.7 MAF
~ 1.1 MAF
~670 TAF
~670 TAF
January
2007
January
2008
~670 TAF
Estimated
January
2009
2009 MWD Supply Outlook
 Projected Initial SWP Table A allocation
≈ 15-20% (300–400TAF)
 CRA Supplies ≈ 850TAF–1MAF
 WSDM Storage Available ≈ 1.1 MAF
 Water Transfer – MWD will participate
in DWR Drought Water Bank, 150+ TAF
 If MWD Shortage Allocation Plan is
implemented ≈ 5-20% Cut
MWD Supply/Demand Balance
CY 2009
Thousand Acre Feet
2,500
2,000
1,500
2009 Demand of 2.2 MAF
1 MAF
Transfers/Storage
/Conservation/
Allocation
570 TAF
Transfers/Storage/
Conservation/
Allocation
SWP
1,000
SWP
500
CRA
CRA
15% SWP Allocation
35% SWP Allocation
0
IAWP Revisions
IAWP Revisions
 MWD Board adopted the following
revisions to the IAWP at its October
Board meeting
 Revision elements:
1)
2)
3)
4)
5)
6)
4-yr IAWP phase out period
Opt-out provision
Ag conservation program
Ag water use reduction contracts
Tier 1 limit adjustment
Water Supply Allocation Plan adjustment
IAWP Phase Out
 IAWP discount and supply reduction provisions
(shortage cutbacks) are the same for 2009
 Starting in 2010 the IAWP discount and
supply reduction amounts will begin to
decrease
 Maximum amount of deliveries under the
IAWP will be revised downward annually
 As of January 1, 2013, the IAWP will no longer
exist and water rates and reliability levels for Ag
use will be equivalent to full service customers
IAWP Phase Out – Discount level
Calendar Year
Treated IAWP
Discount
Untreated IAWP
Discount
2008
$114/AF
$90/AF
2009
$114/AF
$90/AF
2010
$86/AF
$68/AF
2011
$57/AF
$45/AF
2012
$29/AF
$23/AF
2013
$0/AF
$0/AF
IAWP Phase Out – % Reduction
MWD Allocation Plan
Shortage Shortage
Level
%
0
Voluntary
5%
1
IAWP Reduction Percentage
2008
2009
Up To 30%
30%
30%
2010
2011
2012
Up To 24% Up To 18% Up To 11%
24%
18%
11%
2
10%
30%
30%
25%
20%
15%
3
15%
40%
40%
34%
28%
21%
4
20%
50%
50%
43%
35%
28%
5
6
7
8
9
10
25%
30%
35%
40%
45%
50%
75%
90%
100%
100%
100%
100%
75%
90%
100%
100%
100%
100%
63%
75%
84%
85%
86%
88%
50%
60%
68%
70%
73%
75%
38%
45%
51%
55%
59%
63%
Opt-Out Provision
 Growers are able to immediately opt-out of the IAWP
and purchase water at full-service water rates with the
full-service level of reliability
 MWD opt-out notification deadline - January 15, 2009
− Check with your retailer for their deadline
 Growers may also opt-out of the IAWP at the end
of each year during the phase out period
 Once grower opts-out, they will no longer be eligible
for IAWP discount
 Growers must provide opt-out notifications to retail
agency, not MWD or its member agencies
 Growers opting out will still be held accountable for
performance against their 2008 reduction plans
Ag Conservation Program
 MWD will work with SCAWT/CAC, member
agencies and others to develop a new Ag
conservation program
 Program will provide financial incentives to
encourage the use of devices and activities
that lead to greater water use efficiency
in the agricultural sector
 Ag customers opting out and paying full
services rate will be eligible for incentives
 First agricultural conservation incentives
expected to be available by mid-2009
Contracts
 MWD will offer dry-year water use reduction
contracts to agricultural water users
 Grower would agree to reduce water use
for one-year upon call from MWD
 MWD would only make a limited number of
reduction calls over a given period of time
 Example: PVID Land Management
Agreement
 Contract would be between MWD,
member agency, and grower
 Template for contracts will be developed by
the end of 2009
Member Agency Adjustments
 MWD Water Supply Allocation Plan (SAP)
− Allocation based on historical data that did not
include IAWP deliveries
− SAP baselines will be increased as IAWP delivery
is reduced through opt-out or phase out provisions
 Tier 1 Limit Adjustment
− IAWP deliveries were not originally included in
the calculation of minimum purchase quantity
− As the IAWP deliveries decrease, each member
agency’s annual Tier 1 limit will be increased
SDCWA Special Ag Water Rate
 SDCWA Board unanimously approved a 2-year
transitional program for those growers opting out of
IAWP, but wishing to still take advantage of the
SAWR
 Program provides same SDCWA discounts for
storage and supply charges (currently $51/AF &
$44/AF) as provided continuing IAWP participants
 Two conditions of transitional program
− Subject to same reduced allocation from ESP and CSP
− Subject to MWD’s regional M&I cutback
 SDCWA will form a workgroup to consider future
options
IAWP Decision Support
Opt-out Considerations
 Growers are able to opt-out and purchase
water at full-service water rates with fullservice reliability
 Opt-out notification deadline - January 15, 2009
− Check with your retailer for their deadline
 Decision Factors
− 30% IAWP cutbacks will remain in place for ‘09
− Likelihood and extent of MWD urban cutbacks
− MWD Full Service Rates vs. IAWP Rates
 Once grower opts-out, no longer be eligible
for IAWP discount
Shortage Allocation Plan/IAWP
 If necessary, retail shortage allocation declared in April ‘09
 Allocation period – July ‘09 through June ‘10
Retail
Shortage Stage
Retail
Reduction
IAWP
Reduction
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
Stage 6
Stage 7
5%
10%
15%
20%
25%
30%
35%
30%
30%
40%
50%
75%
90%
100%
Step 1-Determine Available Supplies
Available
Available in Year 1
Emergency
Available in an Emergency
Unavailable
Not Available in Year 1
Current Reserves
Some of this water
will be available in
Year 2
Step 2-Reserves for Year 2
Available
Save For Year 2
Current Reserves
Amount depends on
Year 2 conditions and
risk tolerance
Step 3-Set Allocation Trigger
Available
Save For Year 2
Current Reserves
Allowable
Storage
Drawdown
Step 4-Forecast Drawdown &
Determine if Allocation is Needed
Drawdown forecast
depends on Year 1
conditions and risk
tolerance
Available
Save For Year 2
Current Reserves
Allowable
Storage
Drawdown
Step 4-Forecast Drawdown &
Determine if Allocation is Needed
Supplies available at
year’s end, no
allocation necessary
Allowable
Drawdown
Available
Save For Year 2
Current Reserves
Step 4-Forecast Drawdown &
Determine if Allocation is Needed
No supplies available
at year’s end,
allocation necessary
Allowable
Drawdown
Save For Year 2
Current Reserves
MWD Allocation Considerations
 SWP Allocation
− 0% to 35% – M&I allocation certain/highly likely
− 36% to 50% - M&I allocation likely/possible
− 51% to 100% - M&I allocation unlikely
 Impacts to MWD storage levels
− Approximately 1.1 MAF currently in storage
− Indicated 575 TAF may be available in 2009
 Progress on near-term actions in Delta
 Demands on MWD
 Information available by notification deadline
− December 1, 2008 Initial Allocation
− Precipitation from Oct. – Dec. = 35% of SWP Water Year total
Projected MWD Rate Increases
 MWD has begun developing preliminary
estimates of “average” water rates for 2010
 Current estimates for 2010 rates range from
15% to 21%
 Projected increases for later years are 3-4%
 Difference between treated and untreated
assumed the same treatment surcharge
level throughout the phase out period
 Future rate increases will likely be higher if
2009 is dry
Projected MWD Water Rates
Rate Increase
15% increase in 2010,
3% thereafter
21% increase in 2010,
4% thereafter
Projected Treated, Tier 1 Rates
2009
2010
2011
2012
2013
$579
$666
$686
$707
$728
$579
$701
$729
$758
$788
Projected Treated, IAWP Rates
Rate Increase
15% increase in 2010,
3% thereafter
21% increase in 2010,
4% thereafter
2009
2010
2011
2012
2013
$465
$580
$629
$677
$728
$465
$615
$672
$729
$788
Projected Untreated, IAWP Rates
Rate Increase
15% increase in 2010,
3% thereafter
21% increase in 2010,
4% thereafter
2009
2010
2011
2012
2013
$322
$406
$443
$480
$518
$322
$431
$473
$516
$561
Scenarios
Scenarios
 Use scenarios to look at impacts to
growers
− Scenario 1: No MWD Allocation
− Scenario 2: 10% MWD Allocation
− Scenario 3: 15% MWD Allocation
 Compare Opt-out reliability vs. IAWP
 Compare Treated, Tier 1 rates vs.
IAWP rates
 Compare 15% vs. 21% rate increase
 Assumed water use: 10-acre grove with
4 AF/AC/YR
2009 Scenarios
Scenarios
Scenario 1:
No Allocation
Scenario 2:
10% Allocation
Scenario 3:
15% Allocation
Opt-out
IAWP
Opt-out
IAWP
100%
70%
90%
70%
85%
60%
Water for 10-acre grove
(AF)
40
28
36
28
34
24
Price of Water ($/AF)
(Treated, Tier 1 vs IAWP)
$579
$465
$579
$465
$579
$465
MWD Allocation
Cost of Water for
10-acre grove
Eligible for MWD
Funding
Opt-out IAWP
$23,160 $13,020 $20,844 $13,020 $19,686 $11,160
Yes
No
Yes
No
Yes
No
2010 Scenarios
Scenarios
Scenario 1:
No Allocation
Scenario 2:
10% Allocation
Scenario 3:
15% Allocation
Opt-out
IAWP
Opt-out
IAWP
Opt-out
IAWP
100%
76%
90%
75%
85%
66%
Water for 10-acre grove
(AF)
40
30.4
36
30
34
26.4
Price of Water ($/AF)
(Treated, Tier 1 vs IAWP)
$666$701
$580$615
$666$701
$580$615
$666$701
$580$615
MWD Allocation
Cost of Water for
10-acre grove
Eligible for MWD Funding
$26,640- $17,627- $23,976- $17,396- $22,644- $15,308$28,040 $18,684 $25,236 $18,438 $23,834 $16,225
Yes
No
Yes
No
Yes
No
2011 Scenarios
Scenarios
Scenario 1:
No Allocation
Scenario 2:
10% Allocation
Scenario 3:
15% Allocation
Opt-out
IAWP
Opt-out
IAWP
Opt-out
IAWP
100%
82%
90%
80%
85%
72%
Water for 10-acre grove
(AF)
40
32.8
36
32
34
28.8
Price of Water ($/AF)
(Treated, Tier 1 vs IAWP)
$686$729
$629$672
$686$729
$629$672
$686$729
$629$672
MWD Allocation
Cost of Water for
10-acre grove
Eligible for MWD Funding
$27,440- $20,625- $24,696- $20,122- $23,324- $18,110$29,160 $22,029 $26,244 $21,492 $24,786 $19,342
Yes
No
Yes
No
Yes
No
Next Steps
 Track 2009 water supply conditions
 Assess the likelihood and extent of an
allocation of supplies by MWD
 Monitor MWD 2010 rate setting
process
 Work with MWD to develop Ag
Conservation Program
 Update growers through CAC and
SCAWT
2009 Water Year Precipitation
Questions
Additional
Slides
Million Acre-feet
2008 SWP Table A Allocations
Prior to Wanger
Decision
Range w/ Wanger
Decision
There is a range of potential impacts on SWP Deliveries
Likelihood of Exceedence
3%
9%
15%
21%
28%
34%
40%
46%
52%
58%
64%
70%
76%
82%
88%
94%
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
100%
Million Acre-Feet
Range of 2009 SWP Supplies
2008 SWP Table A Allocations
2.0
Prior to Federal
Decision
1.6
1.4
1.2
1.0
0.8
Range w/ Federal
Decision
0.6
0.4
0.2
There is a range of potential impacts on SWP Deliveries
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0.0
100%
Million Acre-feet
1.8
LRFP Update/IAWP Discussion
 Statements in Support - the program:
- Generates revs from water that wouldn’t be sold
- Provides regional water management benefits that
reduce likelihood of shortage allocations to M&I users
- Helps sustain an important segment of the economy
- Provides environmental benefits
- Public supports the program
 Criticisms of IAWP - Ag deliveries are not fully interruptible prior to full
service cuts, thus IAWP discount should be smaller
- Decision to provide discount to Ag users is best made
at the member agency level
- Concern that MWD is securing water transfers while
simultaneously selling surplus water for Ag use at discount
4.50
Base Case
4.00
2.0 MAF Equivalent Case
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
100%
96%
93%
89%
85%
82%
78%
74%
71%
67%
64%
60%
56%
53%
49%
46%
42%
38%
35%
31%
28%
24%
20%
17%
13%
9%
6%
2%
Million Acre-Feet
5.00
Cumulative Supply Need Beyond
Existing Storage (2009-2013)
Likelihood of Exceedence
WSDM Plan Actions
Surplus Stages
5
Surplus
4
3
2
Shortage Stages
1
Actions
Make Cyclic Deliveries
Fill Semitropic, Arvin-Edison
Store supplies in SWP Carryover
Fill Contractual GW
Fill Monterey Res.
Fill Diamond Valley Lake
Conduct Public Affairs Program
Take from Diamond Valley Lake
Take from Semitropic, Arvin-Ed.
Cut LTS and Replen. Deliveries
Take from Contractual GW
Take from Monterey Res.
Call for Extraordinary Conservation
Reduce IAWP Deliveries
Call Options Contracts
Buy Spot Water
Implement Allocation Plan
Potential Simultaneous Actions
1
Shortage
2
3
4
Severe
Shortage
5
6
Extreme
Shortage
7
Long Range Finance Plan Update
 February 2007 - During CY 2008 rate setting process,
MWD Board requests review of LRFP
 July 2007 - Workgroup begins discussion of rate
structure issues, including IAWP
 December 2007 - MWD staff distributes IAWP
White Paper
 January 2008 - Ed Means presents to Workgroup
 March 2008 - Staff presents 6 IAWP options
 April 17, 2008 - Workgroup reviews options
 May 13, 2008 - MWD Board reviews options
 June 9, 2008 - MWD Board approves six month
process to “evaluate” options
Resource Options –
MWD 5 year Plan
Resource Options
Add’l Annual Yield
TAF
Conservation
215 - 415
CR Transactions
100 – 250
Near-Term Delta Actions
SWP Transactions
Groundwater/Runoff Recovery
Local Resources
Total
0
110 - 350
25 - 80
5 -7
455 – 1,102
MWD Ag Water Sales History
 MWD deliveries for agriculture started in 1958
 Objective: sell “surplus” water at a discount in
exchange for:
−
−
Additional revenue
Ability to interrupt a portion of deliveries prior to
curtailments to firm deliveries
 1981 - the discounted rate was rolled into
MWD’s “Interruptible Program”
 1991 - MWD had to interrupt deliveries,
agencies argued against 100% interruption
 MWD adopts new plan which cut Interruptible
deliveries at a higher % than noninterruptible
Interim Ag Water Program History
 IAWP was negotiated in 1994
 Program provides a discounted rate in
exchange for up to a 30% initial cut to Ag
customers prior to M&I users being cut
 1999 Kelly amendment provides that ag
water not sold at a discount is deemed for
M&I uses and thus not surplus
 Wanger Federal Court decision cuts
likelihood of surplus from 70% to 30%
 Ag customers are required to cut demands
for the first time in 2008
IAWP/Long Range Finance Plan
 MWD has used reserves in three out of the
last four years to moderate rate increases nearly 40% of its rate stabilization reserves
 An LRFP Workgroup of MWD’s member
agencies, sub-agencies and staff was
formed to review identified issues and
develop options for the Board
 IAWP included in LRFP update because
the IAWP rate is not based on “cost of
service” as are majority of MWD’s rates
 Workgroup identified six options for the
future of the IAWP for Board review
MWD Supply/Demand Balance
CY 2009
Million Acre Feet
2.5
2
1.5
2.2 MAF – Current Trend Demands
734 TAF
To be updated
705 TAF
1
0.5
770 TAF
0
WSDM Actions
SWP @ 35 percent
CRA