HomeMy WebLinkAbout1996-10-22; Municipal Water District; 346; Update on Water Auhtority's Proposed CSPCARLSBAD MUNICIPAL WATER DISTRICT - AGENI
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\IITG. 1 O/22/96 AN UPDATE ON THE SAN DIEGO COUNTY
WATER AUTHORITY’S PkOPOSED
DEPT. CMWD CUSTOM SERVICE PLAN (CSP)
CITY ATTY.
CITY MGR.
RECOMMENDED ACTION:
This is an informational item and there is no action recommended at this time.
ITEM EXPLANATION:
BACKGROUND
Over the past ten years, the Water Authority has been undergoing a substantial transition In
meeting the water supply needs of its member agencies and their customers. This transition is
likely to continue as the Authority pursues reliability improvements such as emergency storage
and water transfers from outside of the county. Through this process, the divergent needs of the
Authority’s member agencies have become more pronounced. In recognition of this diversity, the
Authority is discussing the possibility of developing the necessary flexibility to meet the individual
requirements of all of its member agencies.
In a memo to the Board dated August 15, 1996, the Chair Mark Watton stated “I believe that a
well-focused regional agency should have sufficient flexibility to meet the unique requirements of
each of its member agencies. And, that forcing a one-size fits all solution on all of our agencies
may result in a ‘compromise’ offering that meets the exact needs of no member agency.”
Chair Watton has proposed that the Authority explore a concept of providing
service that would be based on economic reality and choice. As he explained in his
memo, “. . . if we choose more reliability, we should pay for it. We should also have the
option to make independent judgments how reliability is best obtained and what it might
cost now, or in the future. Pricing should reflect the level and nature of the choices and
commitment made by each member agency.”
Each Authority member agency has unique water service requirements, and might benefit from a
water supply that could be specifically customized to meet its needs. The purpose of this
discussion is to examine some options to provide flexible service to the,Authority’s member
agencies. This conceptual plan is referred to as the “Custom Service Plan (CSP).”
PROGRAM DESIGN
The CSP would be designed to provide all member agencies with water supply
options that have inherent levels of reliability and a pricing method that relates directly
to those options. In other words, rather than the current pass-through rate structure
based on a single source of supply, the CSP would provide a selection of service
options. Each member agency would be able to custom design a water service plan
that meets the specific needs of its customer base. Each service option would carry
with it supply-related shortage allocation conditions and rate setting methods.
The effects of this system would be such that each agency could pay a different water rate and
receive a different supply-related allocation during periods of shortage, based on its subscription
to the various service options. During periods of normal supply, all agencies would receive
comparable service even though their water rates could be substantially different. !
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REVENUE CONSIDERATIONS
The Authority’s revenue needs would still be dependent upon the programs and capital projects
that the Authority would pursue in order to provide the level of reliability that each member
agency requires. While each agency might pay a different rate, the relative rates would have to
be set at a level sufficient to generate the total revenue required by the Authority to cover
operations and debt service.
SERVICE COMPONENTS AND ISSUES
The CSP, in concept, would allow member agencies to select quantities of water from several
service component sources in various combinations, such that the agencies’ desired reliability
and cost of service would be under their control. The service components “menu” would include
the following:
1. IID Transfer Water
2. MWD Supplies
A. High Priority Supply (Third Cut)
B. Normal Supply (Second Cut)
C. Interruptible Agricultural Water (First Cut)
3. Emergency Storage
4. Dry-Year Option Insurance
5. SDCWA Nonsystem Water Transportation Program
Each one of these service components will be discussed in more detail during staff presentation.
Table 1 provides a summary of the service components and comparative information about each
one. Each service component will have its own unique shortage conditions and/or level of
reliability, as well as its own set of cost factors. Each Authority member agency will have the
opportunity to evaluate the reliability and cost of each supply source and to select the quantities
and combinations of service components that best meet the needs of that agency.
SERVICE COMPONENT BALANCING
After the member agencies have determined their need for each service component, a balancing
process will be necessary. Since some service components will offer a finite quantity of water, if
a service component is oversubscribed, member agency requests would have to be
proportionately reduced, or supplemental revenue could be generated to provide for additional
investments that would have to be made in that resource to increase its availability. If a service
component is undersubscribed, investments in that resource would have to be scaled back or
eliminated to reduce the costs so that the resource becomes more attractive to member
agencies.
FISCAL IMPACT:
This is an informational item and there is no fiscal impact at this time.
EXHIBITS:
1. Custom Service Plan Summary
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