HomeMy WebLinkAbout2012-11-27; Municipal Water District; 761; Approve Intent Carlsbad Desalination Project17
CARLSBAD MUNICIPAL WATER DISTRICT - AGENDA BILL
AB# 761 APPROVE RESOLUTION OF INTENT TO
PURCHASE DESALINATED WATER FROM THE
SAN DIEGO COUNTY WATER AUTHORITY -
CARLSBAD DESALINATION PROJECT
DEPT. DIRECTOR /f^f^^fl^
MTG. 11/27/2012
APPROVE RESOLUTION OF INTENT TO
PURCHASE DESALINATED WATER FROM THE
SAN DIEGO COUNTY WATER AUTHORITY -
CARLSBAD DESALINATION PROJECT
CITY ATTORNEY f(^i^
DEPT. UTIL
APPROVE RESOLUTION OF INTENT TO
PURCHASE DESALINATED WATER FROM THE
SAN DIEGO COUNTY WATER AUTHORITY -
CARLSBAD DESALINATION PROJECT CITY MANAGER
RECOMMENDED ACTION:
Adopt CMWD Resolution No. 1460 approving a Resolution of Intent to Purchase Desalinated
Water from the San Diego County Water Authority - Carlsbad Desalination Project.
ITEM EXPLANATION:
The San Diego County Water Authority (SDCWA) is considering entering into a Water Purchase
Agreement (WPA) with Poseidon Resources for the purchase of desalinated water ranging between
48,000 acre-feet per year (AFY) up to 56,000 AFY for 30 years. On September 27, 2012 a draft WPA
was released for public review. The SDCWA Board is scheduled to vote on the WPA on November
29, 2012. If the SDCWA Board votes to approve the WPA, the SDCWA will then meld the cost of the
desalinated water supply with the cost of their other water sources, and then sell the desalinated
water as part of their mix of water supply sources to its 24 member agencies.
As an option to their water supply mix, the SDCWA is offering its member agencies a one-time
opportunity to contract with SDCWA for a commitment to purchase desalinated water directly from the
Carlsbad Desalination Project through a Uniform Member Agency Purchase Contract (UMAPC). The
SDCWA Board approved the form of the UMAPC at their October 25, 2012 meeting. The UMAPC
provides CMWD the option to purchase between 1,000 AFY to 10,000 AFY of desalinated water
directly on a take-or-pay basis. The total amount of desalinated water contracted to member agencies
cannot exceed 49 percent of the 48,000 AFY of SDCWA's take-or-pay water purchase with Poseidon
Resources. The Carlsbad Municipal Water District (CMWD) Board has until November 29th to adopt
a "Resolution of Intent" with the SDCWA regarding the CMWD's desire to participate In a direct
purchase of desalinated water through the UMAPC.
The draft UMAPC (see Exhibit 1) reflects the following:
1. The CMWD commits to a fixed annual purchase amount of SDCWA-owned desalinated water
taken in twelve equal monthly purchases;
2. Member agency contracts are uniform, except as to quantity;
3. The CMWD assumes the same risk profile as SDCWA does with Poseidon Resources;
4. The fixed contract is equal to SDCWA's term which is 30 years;
5. If the SDCWA purchases deliveries In addition to the 48,000 AFY take-or-pay amount, currently
estimated at an additional 8,000 AFY for a total 56,000 AFY deliveries, the CMWD must also
purchase additional deliveries on a pro rata share basis which is the CMWD's committed purchase
amount divided by 48,000 AFY times the additional purchases;
6. The purchased amount is considered a local supply for water shortage and drought response
plans;
7. The CMWD must pay a Management Fee or incentive Payment of $10 per AF.
DEPARTMENT CONTACT: William Plummer 760-602-2768 bill.plummer@carlsbadca.qov FOR CITY CLERKS USE ONLY
BOARD ACTION: APPROVED
DENIED •
CONTINUED TO DATE SPECIFIC
CONTINUED TO DATE UNKNOWN
•
•
CONTINUED • RETURNED TO STAFF •
WITHDRAWN OTHER - SEE MINUTES •
AMENDED
Page 2
The recently adopted CMWD 2012 Water Master Plan Included an analysis of various annual
desalinated water purchases to determine the impacts to the operation of CMWD's water distribution
system from desalinated water. The water master plan also included CMWD's groundwater supply
option, and the proposed Phase III Project recycled water distribution system supply option. Staff has
been working with Gordon Hess and Associates, Inc. and Water Resources Consultants, Inc. to
estimate the long-term costs of a commitment to purchase desalinated water. Based on the
information above the following has been concluded:
Direct Connection Expense - To receive desalinated water directly requires a connection to the
SDCWA's proposed transmission main from the Carlsbad Desalination Project. The recommended
location for a direct connection is at the intersection of Business Park Drive and Lionshead Avenue. At
this location a SDCWA meter & vault would need to be constructed by CMWD and a pipeline
extended approximately 1,100 feet south to CMWD's transmission main in Palomar Airport Road. The
2012 Water Master Plan Included these improvements and estimated the capital cost at $1,446,000.
Pipeline cost information, based on various purchase amounts, is provided in Exhibit 2. The cost of
the improvements is paid from Water Connection fees, and will result in savings to the ratepayer
because no wheeling charges will be incurred on water delivered to the city from this location.
Operational Innpacts - A direct supply of desalinated water in combination with the imported water
supply at CMWD's four existing connections to the SDCWA aqueduct was analyzed in the 2012
Water Master Plan. During the winter months, water operations would be negatively impacted at
desalinated water purchases exceeding 6,200 AFY, because of minimum flow rate requirements; and
therefore, no purchases above that amount are recommended.
Phase III Recycled Water Project - The desalinated water purchase assumed full operation of the
Phase I and Phase II recycled water system. Future expansion of the recycled water system under a
Phase III project would greatly assist In reducing the potable water demand, especially at peak
demand periods in the summer months. If the recycled water system is not expanded, then imported
water would be required to supplement the supply under all desalinated water supply purchase
options. Although potable water revenues would decrease as a result of the customers switching to
recycled water, much of that decrease Is offset directly by the reduced cost of purchased water to the
CMWD. In addition, lost revenues for operating and maintenance costs would be made up through
the recycled water sales.
Potable Water Reliability - A direct supply of desalinated water is considered by the SDCWA as a
local resource for water shortage and drought response plans, and is thereby not subject to
Metropolitan Water District of Southern California (MWD) or SDCWA for imported water cutbacks.
Using the projected potable water demand for year 2020 of 20,529 AFY, and a desalinated water
supply of 2,500 AFY, the CMWD's potable water supply reliability would increase to the percentage
shown in Table 1. Exhibit 2 provides information on reliability using other purchase amounts.
Percent Re
Table 1
lability in Water Supply Under Average Day Demand Conditions
Desalinated
Water
Supply
(AFY)
Percent of CMWD's
Annual Potable Water
Demand, Year 2020
Imported Water Supplies "Cutback"
Desalinated
Water
Supply
(AFY)
Percent of CMWD's
Annual Potable Water
Demand, Year 2020
0% 10% 20% 30% 40% 50%
2,500 12.5% 100% 95% 85% 76% 67% 58%
Net CMWD
Supply
Reliability
Page 3
Unit Cost of Desalinated Water - The purchase cost of desalinated water is estimated by the
SDCWA to range between $2,288/AF to $2,358/AF. The purchase of desalinated water delivered
directly to the SDCWA In excess of the 48,000 AFY is estimated at $533/AF, this is a lower unit cost
because it includes only the variable costs of desalinated water. (Refer to Exhibit 3 for additional detail
on the unit cost determination of desalinated water).
Wheeling Rate Impacts - The direct purchase of desalinated water avoids the SDCWA's wheeling
rate which Is currently $93/AF, and is projected to be $125/AF in 2016, which is the planned date for
initial operation of Poseidon Resources' Carlsbad Desalination Project. It would add about a dollar to
the monthly water cost at the 2,500 AFY level.
Pay Back Period - Based on purchasing 2,500 AFY the payback period is approximately 3.5 years.
The resulting payback period for other purchases is shown on Table 2 of Exhibit 2.
Staff Recommendation - Based on the operational impacts, cost of the desalinated water and Its
associated impacts to CMWD's potable water rate, and reliability parameters staff recommends
obtaining 2,500 AFY from the SDCWA's desalinated water source. The CMWD Board could
detemiine a different amount to purchase from the SDCWA, as outlined in Exhibit 2, depending on the
level of reliability sought, associated long term cost, and operational constraints.
ENVIRONMENTAL IMPACT:
Pursuant to Public Resources Code section 21065, this action does not constitute a "project" within
the meaning of CEQA in that it has no potential to cause either a direct physical change in the
environment, or a reasonably foreseeable indirect physical change in the environment, and therefore
does not require environmental review.
FISCAL IMPACT:
Regional WPA
The increased costs related to the SDCWA Board approving the WPA are estimated to be
approximately $8 per month for the average single family residence using 12 units of water starting
with the first desalinated water deliveries In 2016. This cost is approximately a 13 percent Increase In
CMWD's current rate, or about $5 million In the first year.
Local SUPPIV ~ 2500 AF
If the CMWD were to execute a UMAPC for 2,500 AFY, the estimated additional impact to the CMWD
is about $2.2 million in the first year, and for an average single family residence this represents an
Increase of $3.50 per month in 2016, or an additional Increase of about 5%. The total combined
increases for both the regional supply plus the 2500 AF recommended local supply would increase
the cost of water by about $7 million or more in the first year, and would increase the average
homeowner water bill by about $11.40 per month, an Increase of about 19%.
Local SUPPIV - 5000 AF
If the CMWD were to execute a UMAPC for 5,000 AFY, the estimated additional impact to the CMWD
is about $4.4 million in the first year, and for an average single family residence this represents an
increase of $7.00 per month in 2016, or an additional Increase of about 10%. The total combined
increases for both the regional supply plus the 5000 AF local supply would increase the cost of water
by about $9.3 million or more in the first year, and would increase the average homeowner water bill
by about $14.90 per month, an increase of about 25%.
Page 4
The following table shows the impacts of these options to a single family rate payer:
Monthly Water Bill - Single Family Homeowner
12 Units of Water per IVIonth
CURRENTf*) OAF 2500 AF 5000 AF
Fixed Charge $ 21.38 $ 21.38 $ 21.38 $ 21.38
12 Units Water $ 38.40 $ 38.40 $ 38.40 $ 38.40
Regional Desal $ -$ 7.88 $ 7.88 $ 7.88
Local Desal $ -$ 3.51 $ 7.02
Total Montly Bill $ 59.78 $ 67.66 $ 71.17 $ 74.68
Dollar Increase $ 7.88 $ 11.39 $ 14.90
Percent Increase 13% 19% 25%
(*) Assumes proposed rates for Jan. 1, 2103 were approved on 11/27/2012
Desal Cost - Long Term Forecast
Estimates have been made on the future rate increases for imported water compared to desalinated
water. One projection shown below estimates the cost for imported water may exceed desalinated
water in 2026. If this occurred then the unit cost of desalinated water would diminish and result in a
lower rate of increase in CMWD's potable water rate for the remaining 20 years of the UMAPC.
Cost Per Acre Foot [$/AF]
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$-
•SDCWA •Desal
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Page 5
EXHIBITS:
1. Uniform Contract for Member Agency Purchase of Treated Water From the San Diego County
Water Authority - Carlsbad Desalination Project
2. Impacts from Annual Purchases of Desalinated Water
3. Unit Cost Estimate of Desalinated Water
4. Resolution No. 1460 expressing intention to enter into Uniform Contract for Member
Agency Purchase of Treated Water from the San Diego County Water Authority - Carlsbad
Desalination Project
EXHIBIT 1 - DRAFT Uniform Contract for Member Agency Purchase of Treated Water
From the San Diego County Water Authority - Carlsbad Desalination Project
ATTACmVIENT
UNIFORM CONTRACT FOR MEMBER AGENCY PURCHASE OF
TREATED WATER FROM THE SAN DIEGO COUNTY WATER
AUTHORITY - CARLSBAD DESALINATION PROJECT
1. Purpose and Intent.
The San Diego County Water Authority ('Water Authority") has entered into an
agreement titled "Carlsbad Seawater Desalination Project Water Purchase Agreement between
the San Diego Coimty Water Authority and Poseidon Resources (Channelside) LP dated as of
, 2012" ("Poseidon WPA"). The Water Authority also has entered into an
agreement titled "Design Build Agreement for Product Water Pipeline Improvements Relating to
the Carlsbad Seawater Desalination Project between the San Diego County Water Authority and
Poseidon Resources (Channelside) LP dated as of , 2012" ("Poseidon DBA").
Together the Poseidon WPA and tiie Poseidon DBA will provide new facihties for the
production and provision of desalinated water to the Water Authority and for the purposes of this
contract constitute and are referred to as the "Carlsbad Desalination Project." The Water
Authority has entered into long term financing agreements in conjunction with the Carlsbad
Desalination Project. It also has undertaken improvements and modifications to its aqueduct
system and the Twin Oaks Valley Water Treatment Plant for purposes of taking dehvery of and
incorporating desalinated water into its treated water supply system.
Under the Poseidon WPA the Water Authority has made a Minimum Annual Demand
Commitment, as defined in the Poseidon WPA, of48,000 acre-feet (pro-rated for years of less
than 365 days) and is required to take dehvery of, purchase, and pay for that amount of
desalinated water to the extent it is produced and made available for dehvery according to the
terms of tiiat agreement. In June 2011 the Water Authority board of directors adopted guiding
principles for the Water Authority to make available to its member agencies up to 49 percent of
the Minimum Annual Demand Commitment and provide the opportunity for member agencies to
enter into unifonn contracts to make firm commitments to individually purchase fi^om the Water
Authority treated water in designated amounts that represent a portion of the Mmimum Annual
Demand Commitment. In addition, the Water Authority has the option to take Additional
Product Water Dehveries under the Poseidon WPA and has provided the member agencies the
opportunity to acquire a portion of the additional water as it is acquired by the Water Authority
up to a total quantity for all participating member agencies of 49 percent of the additional water.
Pursuant to the guiding principles, the Water Authority working in cooperation with its member
agencies has developed this and the other unifonn contracts for member agency purchase of
treated water in connection with the Carlsbad Desalination Project.
The parties intend that the purchase and payment obligations ofthe member agencies
under the uniform contracts reasonably match the purchase and payment obhgations of the Water
Authority under the Poseidon WPA. Thus, for example, the parties intend that a contracting
member agency will be responsible for payment if a member agency fails to take delivery of all
or a portion of its Contract Quantity because of a reason other than a condition of its facihties
that would come within the definition of an Excused Demand Shortfall under the Poseidon WPA
in a maimer similar to the Water Authority's obhgations for such payments. Similarly,
1
17 Item 1 n
contractmg member agencies will share the benefit of Drought Shortfall Payments, if any, made
by the Project Company under the Poseidon WPA should it fail to make dehveries in times of a
water siq)ply shortage. However, the parties acknowledge that the water provided by the Water
Authority under the uniform contracts will be treated water fi:om any source determined by the
Water Authority at its sole discretion, and may be a blend of desalinated water and other treated
water of the Water Authority, other tr^ted water of the Water Authority without blending with
desalinated water or, in some limited cases, direct dehvery of desalinated water, and that such
water will deemed to be delivered in equal monthly amounts.
2. Parties.
The parties to this contract are the Water Authority and
("Member Agency").
3. Initial Term and Option to Extend.
(a) This contract is effective on the date it is fully executed and wiU continue for an
Initial Term until the earlier of either (a) 30 years following Commercial Operation as defined in
the Poseidon WPA or the Expiration Date of the Poseidon WPA as defined tiierem, whichever is
later, or (b) the date of early termination of this contract pursuant to section 10.
(b) If the Water Authority chooses to exercise its option to acquire the Carlsbad
Desalination Plant pursuant to the provisions ofthe Poseidon WPA for transfer upon expiration
of the term of that agreement, the Water Authority will offer to each Member Agency that has an
unexpired contract on that date a new uniform contract for the Contract Quantity. It is the intent
of the parties that the new contract will have a term of twenty years and provide price and water
supply benefits to participating member agencies in recognition of their proportional contribution
to the financing of the Plant during the Initial Term.
4. Condition Precedent.
Attainment of the Commercial Operation Date under the Poseidon WPA is a condition
precedent to the obhgations ofthe parties under this contract.
5. Contract Quantity.
(a) The Member Agency's Contract Quantity is acre feet of treated water
per Contract Year, subject to paragraph (d) of this section and adjustment pursuant to paragraph
(d) of section 6. In the event of an adjustment pursuant to section 6, Contract Quantity means
the Adjusted Contract Quantity for the duration of the adjustment. As used in this contract.
Contract Year has the same meaning as in the Poseidon WPA.
(b) The Total Contracted Quantity of water subject to uniform contracts, including
this contract, is per Contract Year. If a member agency having executed a uniform
contract subsequentiy chooses to early terminate its contract pursuant to section 10 or a member
18 Itemi
agency contract is termmated as a consequence of breach by the member agency, the Total
Contracted Quantity will be reduced m die amount of that member agency's Contract Quantity.
(c) The Member Agency's Contract Quantity and die Total Contracted Quantity are
part of die Mhumum Annual Demand Commitment of die Water Audiority under die Poseidon
WPA. In addition, under die Poseidon WPA die Water Audiority has die option to take
Additional Product WatCT Dehveries. Widi respect to Additional Product Water Deliveries, die
Member Agency: will purchase Additional Product Water made available by die Water
Audiority accoidmg to the provisions of section 9: YES / NO ; waives any
participation m die purchase of Additional Product Wato*: YES / NO
(d) Under the Poseidon WPA, die Water Audiority has a right to make an elective
decrease in the Minimum Annual Demand Commitment based on the performance testmg prior
to Commercial Operation of die desalination plant If die Water Audiority elects to reduce die
Minimum Annual Demand Commitment pursuant to the Poseidon WPA, tiie Total Contracted
Quantity will be reduced so diat the reduced Total Contracted Quantity bears die same ratio to
the reduced Minunum Aimual Demand Commitment as die amount specified in subparagraph (b)
of tiiis section bears to 48.000 acre-feet, and die Contract Quantity of each member agency
having a uniform contract wiU be reduced to maintain the ratios of their respective Contract
Quantities and the Total Contracted Quantity. The Water Autiiority will give notice to each
member agency of die reductions, and once given, die reduced quantities will be used for all
purposes of this c(Hitract and die other unifonn contracts.
6. Purchase and Delivery.
(a) The Member Agency will purchase and die Water Autiiority will deUv^ the
Contract Quantity as monthly deliveries of treated water equal to one-twelfdi of the Contract
Quantity.
(b) Purchase and dehvery of the Contract Quantity will commence on the first day of
the calendar month following Commercial Operation of the Carisbad Desalination Plan pursuant
to die Poseidon WPA. F6r die first Contract Year of Commercial Operation die Contract
Quantity will be one-twelfdi of the Contract Quantity tunes the number of fiiU months following
Commercial Operation remaimng in the Contract Year.
(c) Daily water orders will be subject to the Water Authority's rules and regulations
generally apphcable to die ordering and dehvery of treated water.
(d) If at any time the Water Audiority reasonably determines that it will receive
desalinated water pursuant to the Poseidon WPA in an amount less than the Minimum Annual
Demand Commitment for a Contract Year based on the existence of an Uncontrollable
Circumstance, Event of Default, breach, or otiier failure of perfonnance of die Project Company
under die Poseidon WPA, die Member Agency will purchase from the Water Authority and die
Water Authority will dehvery to the Member Agency an Adjusted Contract Quantity for diat
year m an amount determined by the following formula: x = ^ x [- x c] ; where a is the
Member Agency's Contract Quantity, b is die Total Contracted Quantity, c is the amount of
3
19 Item 1 1
desahnated water the Water Authority reasonably expects to actually receive pursuant to the
Poseidon WPA in that Contract Year, d is tiie Mmimum Annual Demand Commitment and x is
the Adjusted Contract Quantity. The purchase and dehvery will be in monthly dehveries of
treated water equal to one-twelflh of the Adjusted Contract Quantity, tf an adjustment is made
after the commencement of a Contract Year, the Adjusted Contract Quantity for the remainder of
the Contract Year wiU take effect at the beginning ofthe next month following the Water
Authority's notice to the Member Agency of the adjustment under this paragraph.
(e) tf at any time the Water Authority reasonably determines that it will receive less
than the Total Contract Quantity or fhe sum of the Adjusted Contract Quantities m a Contract
Year under the Poseidon WPA because the Project Company is reheved firom performance due
to the existence of an Uncontrollable Circumstance, or because of a Project Company default,
breach, or other failure of performance under the Poseidon WPA, the Water Authority's
obhgation to dehver water will be reduced until deliveries to the Water Authority under the
Poseidon WPA resume and the Water Authority reasonably determines that the basis for
suspension no longer exists. To the extent water is dehvered to it, the Water Authority will
deliver and the Member Agency will purchase a reduced monthly quantity determined by the
Water Authority based on the amount of desalinated water it receives and the proportion that the
Member Agency's Contract Quantity bears to the Total Contract Quantity or ttie sum of the
Adjusted Contract Quantities.
(f) tf the Water Authority is unable to dehver treated water to the Member Agency
due to scheduled shut-dovm of Water Authority facilities, the Water Authority is excused from
performance of its dehvery obhgations for the duration of the shut down. However, the Water
Authority will provide make-up water during the Contract Year, or a later period as agreed
between the Water Authority and the Member Agency, proportionate to the number of days of
fhe shut-down.
(g) The Water Authority's obhgation to dehver water wiU be reheved and the
Member Agency's obhgation to purchase will be suspended for the duration of a Product Water
Purchase Rehef Event as defined in the Poseidon WPA.
(h) The Member Agency's obhgation to purchase water will be reheved and the
Water Authority's obhgation to deliver water to the Member Agency will be suspended during
the period of a Member Agency Water Purchase Rehef Event, which for the purposes of this
contract means the formal declaration by the Member Agency's board of directors based upon
the existence of a sudden, uipredictable event resulting in a condition closing all or a portion of
the Member Agency's treated water facihty system and preventing the Member Agency from
taking all or a portion of the Contract Quantity.
7. Characterization of Contract Quantity as Local Supply.
(a) The Contract Quantity will be considered as a source and supply of water
independently owned and managed by the Member Agency in the apphcation of all Water
Authority ordinances, plans, programs, rules, and regulations.
4
20 Item 1 )0
(b) The Contract Quantity will be treated as a "local siq)ply" pursuant to the Water
Authority's Water Shortage and Drought Response Plan and will be ehgible for the Local
Projects Development Adjustment under tiie Water Authority's Si^ly Allocation Methodology,
as either may be amended from time-to-time.
(c) For purposes of administering the ordinances, plans, programs, rules, and
regulations described in paragraphs (a) or (b) of this section, to the extent that a Member Agency
receives less than its Contract Quantity in an ^hcable yearly accounting period because of an
authorized suspension of dehveries by the Water Authority under this contract, the Water
Authority will apply the same considerations as for other local supplies that would be produced
by other Member Agency projects, programs, or rights.
(d) Nothing in this subdivision is intended to limit the abihty of the Water Authority
to amend, replace, repeal, adopt, or re-adopt either the Plan or the Methodology, or another plan
or methodology to allocate supplies in time of shortage or otherwise, provided that the Water
Authority complies with paragraph (a) of this section, tf the Water Authority amends, replaces,
or repeals the Plan or the Metiiodology to eliminate or materially reduce the local si5)ply benefit,
the Member Agency may terminate this Contract as provided in paragraph (b) of section 10.
8. Price and Payment for the Contract Quantity.
(a) The price for the Member Agency Contract Quantity will be the sum of the (1)
Carlsbad Desalination Project Costs and (2) the Aqueduct Costs determmed as foUows:
(1) Unless the circumstance described in paragraph (b) of this section has
occurred, the portion of the unit price attributable to Carlsbad Desalination Project Costs will be
determined and apportioned by the Water Autiiority on a per-acre foot unit price basis:
(A) For each acre-foot of the Contract Quantity delivered in a month the
Member Agency wiU pay the Fixed Unit Price and the Variable Unit Price determined for that
month pursuant to Article 17 of the Poseidon WPA. For each Unexcused Demand ShortfaU Unit
attributed to the Member Agency the Member Agency wiU pay the Fixed Unit Price determined
for that month pursuant to Article 17 of tiie Poseidon WPA. As used m this contract, an
Unexcused Demand ShortfaU Unit attributed to the Member Agency means any failure to take
treated water equal to one-twelfth the Member Agency's Contract Quantity unless the failure is
due to a Member Agency Water Purchase Rehef Event as defined in paragraph (g) of section 6.
(B) For each acre-foot of the Contract Quantity dehvered in a month and
for each Unexcused Demand Shortfall Unit attributed to the Member Agency the Member
Agency wiU pay a unit price equal to (a) the monthly debt service payment amounts and amounts
set aside in reserves pursuant to agreements made by the Water Authority for financing ofthe
obhgations of the Water Autiiority under tiie Poseidon DBA, mcluding refinancmg agreements,
apportioned on a per acre foot basis over the Minimum Annual Demand Commitment imder the
Poseidon WPA; plus (b) the budgeted operation and maintenance costs (including without
limitation reasonable reserves for repair or replacement) for the facihties that are the subject of
the Poseidon DBA detemiined according to the Water Authority's adopted budget for the fiscal
5
21 Item 1
year in which the price is to be paid apportioned on a per acre foot basis over the Minimum
Annual Demand Commitment under the Poseidon WPA.
(C) For each acre-foot of the Contract Quantity dehvered m a month and
for each Unexcused Demand ShortfaU Unit attributed to the Member Agency the Member
Agency wiU pay the Twin Oaks VaUey Water Treatment Charge determined [methodology to
be developed].
(2) For each acre-foot of the Contract Quantity dehvered m a month the Member
Agency wiU pay a unit price for Aqueduct Costs determined by the Water Authority based on the
Transportation Charge estabhshed by tiie Water Autiiority under its rate structure m existence on
fhe date of this contract or a similar charge under any other fiiture rate structure adopted by the
Water Autiiority for use of its water dehvery facihties, which Transportation Charge wiU be
adjusted to provide impropriate credit for amounts determined under paragraphs (1)(A) and (B)
and paid by the Member Agency and other member agencies having umform contracts as part of
the price attributable to Carlsbad Desalination Project Costs.
(b) tf the Water Autiiority acqmres the Carlsbad Desahnation Plant in accordance
witii the Poseidon WPA, the portion ofthe Carlsbad Desalination Project Costs that are
determined under paragraph (1)(A) of subsection (a) wUl be redetermined by the Water
Authority board of dhectors based upon the fuU cost (including without lunitation, capital, debt
service, acquisition, operation, mamtenance, administrative overhead, depreciation, reserves) of
the Water Authority's ownership, operation, and maintenance of the plant.
(c) In addition to the unit price determined according to subsections (a), (b), and (c),
the Member Agency wiU pay an annual Administration Charge of [charge amount to be
developed]. The Administrative Charge wiU be adjusted each Contract Year after the first fiiU
Contract Year foUowing satisfaction of the condition precedent under paragraph 4 [adjustment
factor to be developed].
(d) The Water Authority wiU rebate to the Member Agency a share of any Drought
Shortfell Payments received by the Water Authority pursuant to the Poseidon WPA based on the
ratio ofthe Member Agency's Contract Quantity to the Mmimum Aimual Demand Commitment.
(e) tf the amount of water received by tiie Water Authority pursuant to the Poseidon
WPA is less than its Minimum Monthly Demand Commitment under that agreement, then the
Member Agency's Contract Quantity deemed dehvered in that month wiU be reduced to reflect
the ratio ofthe Member Agency's Contract Quantity to the Minimum Annual Demand
Commitment times the amount of desalinated water delivered to the Water Authority in that
month.
(f) The [unit price] [administrative charge] may mclude additional charges to recover
additional costs paid by the Water Authority for Base Product Water Dehveries pursuant to the
Poseidon WPA for the prior fiscal year that were not recovered in the cumulative payments of
the unit price for that prior year, or credits to aUocate the benefit of payments received by the
Water Authority pursuant to the Poseidon WPA for the prior fiscal year.
6
22 Item 1
(g) Nothing in this contract precludes the Water Autiiority from estabhshing or
excuses the Member Agency from paying any other non-discriminatory fee or charge generaUy
apphcable to Water Authority member agencies, except tiiat the Contract Quantity wiU not be
used to calculate the Member Agency's customer service or storage charges under the Water
Authority rate stmcture in existence on the date of this contract or any simUar fiiture rate
stmcture ofthe Water Authority.
(h) The unit price upon commencement of this contract and for the initial fiscal year
(July 1 - June 30) foUowing tiie Commercial Operation Date under tiie Poseidon WPA is
estimated to be $ for the Carlsbad Desalination Project Costs and $
for the Aqueduct Costs. The Water Authority wiU determme and give notice to the Member
Agency ofthe actual unit price for the Contract Year ofthe Commercial Operation Date and tiie
fhst Contract Year thereafter on . Thereafter the Water Authority wiU determine
and give notice to the Member Agency of the unit price for a Contract Year on or before July 1
of each year. The notice will be given in writing and include a brief description ofthe basis
determination consistent with subdivision (a).
(i) The unit price for water deemed dehvered in a calendar month is due on the 15***
day ofthe following month in accordance with tiie Water Authority's bUling practices ^plicable
to water dehvery generally. The Administrative Charge is payable in twelve equal monthly
installments due on the 15*^ day of each montii. Dehnquent payments are subject to the same
pohcies, including provisions or payment of interest and penalties, estabhshed by the Water
Authority for billing and coUection of fees, rates, and ch^ges generally
9. Additional Product Water.
Additional Product Water wiU be made available to each member agency that has agreed
to participate in the purchase of Additional Product Water according to paragraph (c) of section 5
if and when the Water Authority determines to take Additional Product Water pursuant to tiie
Poseidon WPA. As it is received, the Additional Product Water wiU be dehvered to each
participating member agency as treated water at the same price paid by the Water Authority for
tiiat water under the Poseidon WPA; in addition tiie Member Agency will pay tiie Aqueduct Cost
pursuant to paragraph (a)(2) of section 8 for each acre-foot of water dehvered. Additional
Product Water made available to the Member Agency wiU be treated as a local supply as
provided in section 7.
10. Early Termination.
(a) If the Water Autiiiority acquires the Carlsbad Desalination Plant pursuant to the
Poseidon WPA, other than pursuant to the provisions for transfer upon expiration of the term of
that agreement, tiie Member Agency wiU have 90 days after tiie date of such acquisition to
terminate tiiis contract by giving written notice to the Water Authority. The Member Agency
wiU be deemed to have waived the provisions of this section if it does not dehver the written
notice to the Water Authority within 90 after the date of acquisition.
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(b) tf the Water Authority amends, replaces, or repeals the Water Shortage and
Drought Response Plan or Supply Allocation Methodology to eliminate or materiaUy reduce the
local supply benefit, the Member Agency wiU have 90 days after notice ofthe amendment,
replacement, or repeal to temiinate this contract by giving written notice to the Water Authority.
The Member Agency wiU be deemed to have waived the provisions of this section if it does not
dehver the written notice to the Water Authority within 90 days.
11. Entire Agreement.
This contract constitutes the entire understanding among ttie parties with respect to the
matters set forth herein, and supersedes aU prior or contemporaneous understandings or
agreements among the parties with respect to the subject matter hereof, whether oral or written.
12. Non-severability.
The covenants and obhgations of each paity constitute consideration for the covenants
and obligations of the other parties and that the provisions of this contract cannot be severed one
fix)m the other without affecting the respective and mutual benefits to be obtained by the parties
fiom enforcement of the contract as a whole.
13. Amendment.
Neither this contract nor any of its provisions may be waived, modified, amended,
discharged, or terminated except by an instrument in writing signed by the party against which
the enforcement of such waiver, modification, amendment, discharge or termination is sought,
and then only to the extent set forth in such writing. However, for purposes of this contract, the
Poseidon WPA, the Poseidon DBA, and any agreements relatmg to tiie financing, construction,
reconstmction, operation, or maintenance of the Carlsbad Desalination Project includes any
amendments to those agreements approved and executed by the Water Authority, and no
amendment of any of those agreements wiU be considered an amendment to this or any ofthe
uniform contracts.
14. Construction.
This contract constimtes a fuUy-negotiated agreement among commerciaUy sophisticated
parties, each assisted by legal counsel, and the terms of this contract shaU not be constmed or
interpreted for or against any party hereto because that party or its legal representative drafted or
prepared such provision. Headings, titles and captions are for convenience only and shaU not be
used for the inteipretation of the provisions of this contract.
15. Controlling Law.
This contract shaU be govemed by, and constmed and interpreted in accordance with, the
laws ofthe State of Cahfomia, without giving effect to any choice-of-law or conflicts-of-laws
rule or principle that would result in the apphcation of any other laws.
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16. Notices.
Any notice, E^roval, consent, waiver or other communication required or permitted to
be given or to be served upon any party in connection with this contract shaU be in writing. Such
notice shall be personally serve4 sent by facsimUe, sent prepaid by regista-ed or certified mail
with retum receipt requested, or sent by reputable ovemi^t dehvery service, such as Federal
Express, and shall be deemed given: (a) if personaUy served, when dehvered to the Party to
whom such notice is addressed; (b) if given by facsimile, when sent, provided tiiat the
confirmation sheet from the sending fax machine confirms that the total number of pages were
successfiiUy transmitted; (c) if given by prepaid or certified mad with retum receipt requested,
on the date of execution ofthe retum receipt; or (d) if sent by reputable overnight delivery
service, such as Federal Express, when received. Such notices shaU be addressed to the party to
whom such notice is to be given at the address specified below or as such party shaU otherwise
direct in writing to the other parties delivered or sent in accordance with this paragraph. The
"copy to" notice to be given as set forth below is a courtesy copy only; a notice given to such
person is not sufhcient to effect giving a notice to the principal party, and a faUure to give such a
courtesy copy of a notice does not constitute a faUure to give notice to the principal party.
To the Water Autiiority: San Diego County Water Authority
4677 Overland Avenue
San Diego, CA 92123
ATTN: General Manager
With a copy to: San Diego County Water Authority
4677 Overland Avenue
San Diego, CA 92123
ATTN: General Counsel
To the Member Agency:
With a copy to:
17. Cumulative Rights; Waiver.
The rights created under this contract, or by law or equity, shaU be cumulative and may
be exercised at any time and from time to time. Except as otherwise expressly provided in this
contract or except passage of time specified by statute for limitation of actions, a failure, delay,
or omission by any party in exercising any ri^t, shaU not be constmed or deemed to be, or
operate as a waiver of that right, and no single or partial exercise by any party of a right preclude
any other or future exercise thereof or the exercise of any other right. No party may waive any
ri^t and no non-defaulting party may waive any breach by the defaulting party of any provision
of this contract unless the waiver is in writing, and any waiver by any non-defaulting party of
any breach by a defaulting party of any provision of this contract shall not operate as or be
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constmed to be a waiver of any other breach of that provision or of any breach of any other
provision of this contract. The faUure of any party to insist upon strict adherence to any term of
this contract on one or more occasions shaU not be considered a waiver of any provision or any
breach of any provision of this contract or deprive that party of the right thereafter to insist upon
strict adherence to that provision or any other provision of this contract.
16. No Third Party Beneficiaries.
This contract does not create, and shaU not be constmed to create, any rights enforceable
by any person, partnership, corporation, joint venture, limited habihty company or other form of
organization or association of any kind that is not a party to this contract. Nothing m this
contract shall be constmed to madce the Member Agency a thhd party beneficiary ofthe Poseidon
WPA.
17. Execution in Counterparts; Facsimile Signatures.
This contract may be executed in counterparts, each of which shaU be deemed an
original, but aU of which together shaU constitute one and the same instrument. The signature
page of any counterpart may be detached therefix)m without impairing the legal effect ofthe
signature(s) thereon, provided such signature page is attached to any other counterpart identical
thereto except for having an additional signature page executed by the other party. Each party
agrees that ttie other parties may rely upon the facsimUe signature of a party on tiiis contract as
constituting a duly authorized, irrevocable, actual, current delivery of this contract as fiiUy as if
this contract contained the original ink signature of the party supplying a facsimUe signature.
18. Time of the Essence.
Time is of the essence of each and every provision of this contract.
19. Proof of Authority.
Each party shaU dehver to the other party copies of such resolutions, certificates or
written assurances evidencing authorization to execute, deliver, and perform this contract.
20. Number, Gender.
Where a word or phrase is defined in this contract, its other grammatical forms have a
conesponding meaning. As used herein, and as the circumstances require, the plural term shaU
include the singular, the singular shaU include the plural, the neuter term shaU include the
masculine and feminine genders, the masculine term shaU include the neuter and the feminine
genders, and the feminine term shaU include the neuter and the masculine genders.
21. Relationsh^.
Nothing in this contract shaU be deemed to constitute either party a partner, agent or legal
representative of the other party. No hability or benefits, such as workers' compensation,
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pension rights or habihties, other provisions or habUities arising out of or related to a contract for
hire or en[q)loyer/employee relationship, shall arise or accme to any party's agent or employee as
a result of tiiis contract or its performance. Each party is responsible for own acts and omissions,
and the acts or omissions of its respective officers, employees and agents.
22. Defense.
The parties agree to cooperate to defend this contract by any person or entity that is not a
party to this contract, provided, however, that each party shaU bear its own attomeys' fees and
costs, unless the parties otherwise agree.
23. Assignment.
Neither the Member Agency nor the Water Authority wiU assign any of its rights,
interests, or obhgations under this contract, except that upon a govemmental reorganization the
obhgations of a party under this contract wiU be transfened to the successor agency.
24. Limitation of Liability.
The Water Authority shaU not be hable to the Member Agency for any monetary
damages of any kind or nature whatsoever, whether based on contract, wananty, tort (including
ne^gence or strict liabUity), or otiierwise, resultmg frnm tiie faUure to dehver the Contract
Quantity. The Member Agency's exclusive remedy for the Water Authority's breach of this
contract is a reduction in the payment of the unit price to the extent of the shortfall in delivery of
the Contract Quantity.
25. Force Majeure
The performance ofthe Water Authority's obhgation to dehver and tiie Member
Agency's obhgation to purchase the Contract Quantity is excused to the extent and for the
duration that the perfonnance is prevented by: acts or faUure to act by any govemment agency or
authority (otiier than tiie Water Autiiority or tiie Member Agency); natural disaster such as
earthquake, fire, or flood; war; labor strike or lockout; riots, msunection, rebeUion, acts ofthe
public enemy, acts of tenorism and sabotage; or otiier cause beyond the control of the party
claiming the prevention of performance. A reduction of the Member Agency's treated water
demand due to weather, consumer consumption, avaUabihty of altemate supphes, or similar
reason wiU not be grounds for relief under this section. In tiie event the performance of a party is
prevented under this section, the performance of both parties wiU be excused until the
performance is no longer prevented. The parties wUl reasonably cooperate to seek a restoration
of the performance, however, neither party is obhged to expend resources to restore, repair, or
replace facUities or services of the other party the damage or intermption of which is the cause of
the prevention of performance. This section does not apply to circumstances v^rithin the scope of
rehef imder section 6 of this contract.
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26. Execution and Effective Date.
This contract is effective as of the last date of execution by the parties as shown below:
Water Authority
By: Date:
Member Agency
By: Date:
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EXHIBIT 2 - Impacts from Annual Purchases of Desalinated Water
Table 1
Percent Reliability in Water Supply Under Average Day Demand Conditions
Desalinated Percent of CMWD's
Annual Potable Water
Demand from
Desalinated Seawater
Supply
Imported Water Supplies "Cutback"
Water
Supply
(AFY)
Percent of CMWD's
Annual Potable Water
Demand from
Desalinated Seawater
Supply
0% 10% 20% 30% 40% 50% >»
a
10,000 50% 100% 95% 90% 85% 80% 75% CMWD Si Reliabilit 5,000 25% 100% 93% 85% 78% 70% 63% CMWD Si Reliabilit 3,500 17.5% 100% 92% 84% 75% 67% 59% CMWD Si Reliabilit 2,500 12.5% 100% 95% 85% 76% 67% 58% Net 1,000 5% 100% 90% 81% 72% 62% 53%
Table 2
Pay Back Period
Desalinated Water Supply Payback-Period
10,000 AFY 1.25 years
5,000 AFY 2.0 years
3,500 AFY 2.75 years
2,500 AFY 3.5 years
1,000 AFY 6.5 years
Table 3
Pipeline Cost for Direct Connection to Desalinated Water Supply
Desalinated Water Supply Size Project Cost
10,000 AFY 24" $660,000
5,000 AFY 18" $462,000
3,500 AFY 16" $402,000
2,500 AFY 12" $292,000
1,000 AFY 8" $220,000
EXHIBIT 3 - Unit Cost Determination of Desalinated Water
Table 4
Unit Cost of Desalinated Water
2013 Cost 48,000 AFY Minimum
Annual Commitment
8,000 AFY Additional
Desalinated Water
Debt Service Charge $551/AF $0
Equity Return Charge $280/AF $0
Pipeline Installment Payments $238/AF $0
Fixed Non-electricity O&M $400/AF $0
Fixed Electricity O&M $73/AF $0
Variable Non-electricity O&M $101/AF $101/AF
Variable Electricity O&M $442/AF $442/AF
Annual Management Fee $10/AF $10/AF
Total $2,095/AF $553/AF
Other SDCWA Costs $193/AF $0
Direct Purchase Price $2,288/AF $553/AF
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RESOLUTION NO. 1460
A RESOLUTION OF THE BOARD OF DIRECTORS OF
CARLSBAD MUNICIPAL WATER DISTRICT (CMWD),
EXPRESSING INTENTION TO ENTER INTO UNIFORM
CONTRACT FOR PURCHASE OF TREATED WATER FROM
THE SAN DIEGO COUNTY WATER AUTHORITY -
CARLSBAD DESALINATION PROJECT.
WHEREAS, the San Diego County Water Authority (SDCWA) is considering entering
into an agreement titled "Carlsbad Seawater Desalination Project Water Purchase Agreement"
between the San Diego County Water Authority and Poseidon Resources (Channelside) LP
dated as of , 2012 ("Poseidon WPA"); and
WHEREAS, under the Poseidon WPA the SDCWA intends to purchase at least 48,000
acre-feet annually of highly reliable, high quality desalinated water to the extent it is produced
and made available for delivery according to the terms of that agreement, as well as additional
product water; and
WHEREAS, in June 2011 the SDCWA Board of Directors adopted guiding principles
for the SDCWA to make available to its member agencies under uniform contracts desalinated
water in an amount up to a total of 49 percent of the desalinated water purchased by the SDCWA
under the Poseidon WPA; and
WHEREAS, the SDCWA has provided the Carlsbad Municipal Water District (CMWD)
with the proposed Poseidon WPA; and
WHEREAS, the SDCWA has provided the Cartsbad Municipal Water District with a
uniform contract pursuant to the guiding principles.
NOW, THEREFORE, BE IT RESOLVED by the Cartsbad Municipal Water District
Board ofthe City of Cartsbad, California, as follows:
1. That the above recitations are true and correct.
2. The Carlsbad Municipal Water District Board supports the approval of the
Cartsbad Desalination Project Water Purchase Agreement.
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3. The Carlsbad Municipal Water District intends to enter into a uniform contract to
purchase 2,500 acre feet per year of desalinated water as a local water supply so long as it
remains adequately protected as a local source as determined by the Board.
4. The Carlsbad Municipal Water District recognizes that the unit cost amount
specified in paragraph 1 of the WPA may be reduced if the SDCWA receives statements of
intention to purchase water in an amount that totals more than 48,000 acre-feet annually.
5. A copy of this resolution shall be provided to the Clerk of the Board of the San
Diego County Water Authority.
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PASSED, APPROVED AND ADOPTED at a Special Meeting of the Board of
Directors of the Cartsbad Municipal Water Distnct of the City of Cartsbad on the 27th
day of November, 2012, by the following vote to wit:
AYES: Board Members Hall, Kulchin, Blackburn, Douglas, Packard
NOES: None
ABSENT: None
ATTEST:
(SEAL) Karen R. Kundtz, Assistant Secretary
S:o5 -Z <J0;o
- «A'. .
G '
V CARLSBAD
Municipal Water District
Memorandum
November 27, 2012
AU Receive-Agenda Item #.
For the Information of the:
CITYCOL^CIL /
Asst.CM. CA ^jeic Y
DateJ
It. f M C>
ty Manager.
To:
From:
Re:
Cynthia Haas, Deputy City Manager
Wendy Chambers, Acting General Manager
Revised Desal Resolution for November 27, 2012 City Council Meeting
Attached is the revised resolution modifying the current resolution to include a statement of
support as requested by CMWD Board member, Farrah Douglas, per approval by General
Counsel Ron Ball.
Thank you.
Date:.
Distribution:
City Clerk
Asst. City Clerk
Deputy Clerk
Book
Carlsbad Municipal Water District
5950 El Camino Real I Carlsbad, CA 92008 I 760-438-2722 I 760-431-1601 fax I www.carlsbadca.gov
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RESOLUTION NO.
A RESOLUTION OF THE BOARD OF DIRECTORS OF
CARLSBAD MUNICIPAL WATER DISTRICT (CMWD),
EXPRESSING INTENTION TO ENTER INTO UNIFORM
CONTRACT FOR PURCHASE OF TREATED WATER FROM
THE SAN DIEGO COUNTY WATER AUTHORITY -
CARLSBAD DESALINATION PROJECT.
WHEREAS, the San Diego County Water Authority (SDCWA) is considering entering
into an agreement titled "Carlsbad Seawater Desalination Project Water Purchase Agreement
between the San Diego County Water Authority and Poseidon Resources (Channelside) LP
dated as of , 2012 ("Poseidon WPA"); and
WHEREAS, under the Poseidon WPA the SDCWA intends to purchase at least 48,000
acre-feet annually of highly reliable, high quality desalinated water to the extent it is produced
and made available for delivery according to the terms of that agreement, as well as additional
product water; and
WHEREAS, in June 2011 the SDCWA Board of Directors adopted guiding principles
for the SDCWA to make available to its member agencies under uniform contracts desalinated
water in an amount up to a total of 49 percent of the desalinated water purchased by the SDCWA
under the Poseidon WPA; and
WHEREAS, the SDCWA has provided the Carlsbad Municipal Water District (CMWD)
with the proposed Poseidon WPA; and
WHEREAS, the SDCWA has provided the Carlsbad Municipal Water District with a
uniform contract pursuant to the guiding principles.
NOW; tHEREFORE, BE IT RESOLVED by the Carlsbad Municipal Water District
Board of the .City Qf Carlsbad-, California, as follows:
1. That the above recitations are true and correct.
2. The Carlsbad Municipal Water District Board supports the approval of the
Carlsbad Desalination Project Water Purchase Agreement.
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3. The Carlsbad Municipal Water District intends to enter into a uniform contract to
purchase 2,500 acre feet per year of desalinated water as a local water supply.
4. The Carisbad Municipal Water District recognizes that the unit cost amount
specified in paragraph 1 of the WPA may be reduced if the SDCWA receives statements of
intention to purchase water in an amount that totals more than 48,000 acre-feet annually.
5. A copy of this resolution shall be provided to the Clerk of the Board of the San
Diego County Water Authority.
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PASSED, APPROVED AND ADOPTED at a Special Meeting of the Carlsbad Municipal
Water District of the City of Carlsbad on the day of , 2012 by the
following vote, to wit:
AYES:
NOES:
ABSENT:
MATT HALL, President
ATTEST:
LORRAINE M. WOOD, Secretary
(SEAL)
^^^^^ jU^;^
(ARLSBAD Q<d^\
CHAMBER OF COMMERCE ^ ,A s
November 27, 2012
Mayor Matt Hall
City of Carlsbad
1200 Carlsbad Village Dr.
Carlsbad, CA 92008
RE; Reaffirm Support for the Carlsbad Desalination Plant Water Purchase
Agreement
Dear Mayor Hall and City Council Members:
The Carlsbad Desalination Project is widely supported by the members of the Carlsbad
Chamber of Commerce and by business organizations through the County because of
the universal desire to develop new local water resources that enhance supply
reliability. Water supply reliability is one ofthe most important Issues for the business
community and the challenges associated with importing water Into San Diego County
are well documented. The future availability of imported supplies Is an Issue that San
Diego must confront head on.
The Chamber has been following the San Diego Water Authority Board's lengthy
deliberations on the proposed water purchase agreement and found the comprehensive
and transparent analysis of the costs of the Carlsbad Desalination Project and the costs
associated with other alternative local supplies to be acceptable.
On July 18, 2012, the Board of Directors of the Carlsbad Chamber of Commerce met to
discuss the San Diego Water Authority's analysis that the integration of desalinated
water from the Carlsbad plant Into the San Diego Water Authority's supply mix.
Specifically, the Board discussed the San Diego Water Authority staff's estimate that the
availability of this new supply in 2016 would result in a one-time increase to the
Authority's melded treated water rate of 5% to 10%; and that within 15 years, the
incremental cost of the desalinated water over that of the less reliable imported water
would be reduced to zero.
In Its deliberations, the Board noted that the members Carlsbad Chamber of Commerce
consistently rank the risk of future water supply shortages as one ofthe most significant
challenges to attracting and retaining businesses to the region. It Is well documented
that the Carlsbad Desalination Project would improve regional water supply reliability,
and would provide a meaningful hedge against future shortages of Imported water.
5934 Priestly Drive • Carlsbad, California 92008
Phone: (760) 931-8400 • Fax: (760) 931-9153 • E-mail: chamber@carlsbad.org • Web: www.carlsbad.org ACCREDITED
Pg.2
For these reasons and many others, that the Carlsbad Chamber Board of Directors
determined that the expected increase In wholesale water rates is warranted and
acceptable, and hereby reaffirms its support for the Carlsbad Desalination Project.
The Carlsbad Chamber of Commerce Board of Directors encourages you to support the
Water Purchase Agreement.
Thank you for your time and consideration on this important issue to provide Carlsbad
with a reliable water supply in the future.
Sincerely,
Ted Owen, President and CEO
cc:
City Council - Carlsbad
Mayor Pro Tem Ann Kulchin
Council Member - Keith Blackburn
Council Member - Farrah Douglas
Council Member - Mark Packard
4 *Jr*i> CITYOF
V CARLSBAD
Office of the City Clerk www.carlsbadca.goN
November 30, 2012
Doria Lore
Clerk ofthe Board
San Diego County Water Authority
4677 Overland Avenue
San Diego, CA 92123
Dear Doria,
Re: Carlsbad Municipal Water District Resolution
Please find attached certified copy ofCarlsbad Municipal Water District Resolution No. 1460, expressing
intention to enter into Uniform Contract for purchase of treated water from the San Diego County
Water Authority-Carlsbad Desalination Project.
If you require anything further, please contact us.
Sincerely,
DONNA HERATY
Deputy City Clerk.
Records Management
1200 Carlsbad Village Drive, Carlsbad, CA 92008-1949 T 760-434
STATE OF CALIFORNIA )
COUNTY OF SAN DIEGO ) ss.
I, Karen R. Kundtz, Assistant Secretary of the Carlsbad Municipal Water
»
District, City of Carlsbad, County of San Diego, State of California, hereby certify that I
have compared the foregoing copy with the original RESOLUTION NO. 1460,
RESOLUTION OF THE BOARD OF DIRECTORS OF THE CARLSBAD
MUNICIPAL WATER DISTRICT. WHICH EXPRESSES INTENTION TO
ENTER INTO A UNIFORM CONTRACT FOR PURCHASE OF TREATED
WATER FROM THE SAN DIEGO COUNTY WATER AUTHORITY - CARLSBAD
DESALINATION PROJECT, with the original now on file in the Office of the
Carlsbad Municipal Water District Secretary; that the same contains a full, true and
correct transcript therefrom and of the whole thereof.
Witness my hand and the. seal of said Carlsbad Municipal Water District, this
28th day of November, 2012.
RCJPFN
Assistant Secretary
(SEAL)
p 1.
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RESOLUTION NO. 1460
A RESOLUTION OF THE BOARD OF DIRECTORS OF
CARLSBAD MUNICIPAL WATER DISTRICT (CMWD),
EXPRESSING INTENTION TO ENTER INTO UNIFORM
CONTRACT FOR PURCHASE OF TREATED WATER FROM
THE SAN DIEGO COUNTY WATER AUTHORITY -
CARLSBAD DESALINATION PROJECT.
WHEREAS, the San Diego County Water Authority (SDCWA) is considering entering
into an agreement titled "Carlsbad Seawater Desalination Project Water Purchase Agreement"
between the San Diego County Water Authority and Poseidon Resources (Channelside) LP
dated as of , 2012 ("Poseidon WPA"); and
WHEREAS, under the Poseidon WPA the SDCWA intends to purchase at least 48,000
acre-feet annually of highly reliable, high quality desalinated water to the extent it is produced
and made available for delivery according to the terms of that agreement, as well as additional
product water; and
WHEREAS, in June 2011 the SDCWA Board of Directors adopted guiding principles
for the SDCWA to make available to its member agencies under uniform contracts desalinated
water in an amount up to a total of 49 percent of the desalinated water purchased by the SDCWA
under the Poseidon WPA; and
WHEREAS, the SDCWA has provided the Carlsbad Municipal Water District (CMWD)
with the proposed Poseidon WPA; and
WHEREAS, the SDCWA has provided the Carlsbad Municipal Water District with a
uniform contract pursuant to the guiding principles.
NOW, THEREFORE, BE IT RESOLVED by the Carlsbad Municipal Water District
Board ofthe City of Carlsbad, California, as follows:
1. That the above recitations are true and correct.
2. The Carlsbad Municipal Water District Board supports the approval of the
Carlsbad Desalination Project Water Purchase Agreement.
1 3. The Carlsbad Municipal Water District intends to enter into a uniform contract to
2 purchase 2,500 acre feet per year of desalinated water as a local water supply so long as it
3 remains adequately protected as a local source as determined by the Board.
4 4. The Carlsbad Municipal Water District recognizes that the unit cost amount
5 specified in paragraph 1 of the WPA may be reduced if the SDCWA receives statements of
6 intention to purchase water in an amount that totals more than 48,000 acre-feet annually.
7 5. A copy of this resolution shall be provided to the Clerk of the Board of the San
8 Diego County Water Authority.
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PASSED, APPROVED AND ADOPTED at a Special Meeting of the Board of
Directors of the Carlsbad Municipal Water District of the City of Carlsbad on the 27th
day of November, 2012, by the following vote to wit:
AYES: Board Members Hall, Kulchin, Blackburn, Douglas, Packard
NOES: None
ABSENT: None
ATTEST:
(SEAL) Karen R. Kundtz, Assistant Secretary
Notice of Intent
to Purchase Desalinated Water
November 27, 2012
1
2
Carlsbad Desalination Project
Poseidon Resources
50 MGD = 56,000 AFY
Desal Conveyance Pipeline
10-miles of new 54-inch pipe
Pipeline 3 Relining
(27,100 feet)
TOVWTP Improvements
Desalination Plant
Aqueduct
ConnectionFacilities
Desalinated Water - Local Supply
•Option to purchase: 1,000 – 10,000 AF
•Take -or-pay agreement
•One time opportunity
•Resolution of Intent to SDCWA by Nov. 29th
5
Local Desalinated
Water Purchase Agreement
1.CMWD must commit to a fixed annual purchase amount
(taken in 12 equal monthly purchases)
2.CMWD assumes the same risk profile as SDCWA
3.Agreement is fixed at 30 years
4.Purchase deliveries above 48,000 AFY requires CMWD to
purchase additional deliveries on a pro rata share basis
5.The purchased amount is considered a “local supply “ for
water shortage and drought response plans
6.The CMWD must pay a $10/AF Management Fee
6
Benefits & Risk
7
Benefits of Desal as Local Supply
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•Purchased amount considered a “local supply”
–For Water Shortage and Drought Response Plans
–Not subject to MWD or SDCWA cutbacks
•Participate in low cost water in excess of 48,000 AFY (take or pay)
–Pay variable costs only - $553 per AF
•Roll off SDCWA’s Customer Service and Storage Charges
•Avoid wheeling charge for direct purchase $125/AF
Local Supply = Reliability
Example: 20% Mandatory Cutback
Assumed Annual delivery: 20,000 AFY (100%)
Delivery with 20% Cutback: 16,000 AFY (80%)
Desal Purchase at 2,500 AFY: 17,100 AFY (86%)
Desal Purchase at 5,000 AFY: 18,200 AFY (91%)
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Risks
•Long-term commitment – 30 years
•Take -or-pay
–12 equal monthly amounts
–1st deliveries considered Desalinated Water
•Cost Allocation from CWA unknown
•Local Supply designation can be changed
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Financial Impact
of Local Supply
Purchase
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Base Assumptions -
Water Cost Comparison
•Demands - Urban Water Management Plan
•Local Desalinated Water costs
–Fixed cost with 2.5% annual adjustment
–Variable costs inflated by CPI
•Melded Supply Costs (2 to 6 percent per year)
–Adjusted for Bay Delta costs
–Adjusted for SDCWA Pipe relining costs
–Adjusted for regional desalinated water costs
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Desalinated Water Cost Comparison
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2026
What if desal costs are higher?
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CMWD Single Family Home – Year 1
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$-
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
Current Zero 2500 AF 5000 AF
Local Reliability
Desal/Regional
CWA/MWD
Resolution of Intent
16
•CMWD commits to fixed annual purchase of 2,500
AFY in 12 equal monthly purchases
•Purchased amount considered a local supply
•The Unit Cost amount in Water Purchase Agreement
may be reduced if SDCWA is able to purchase more
than 48,000 AFY
Recommendation
•Adopt CMWD Resolution No. 1460 approving
a Resolution of Intent to Purchase Desalinated
Water from the San Diego County Water
Authority in the amount of 2,500 AF
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Questions ?
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ADDITIONAL SLIDES
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Resolution of Intent
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•CMWD commits to fixed annual purchase of 2,500
AFY in 12 equal monthly purchases
•Purchased amount considered a local supply
•The Unit Cost amount in Water Purchase Agreement
may be reduced if SDCWA is able to purchase more
than 48,000 AFY
Calculation of deliveries with 20%
cutback and 5000 AF local supply
•Annual Deliveries 20,000 AF (100%)
•Less: Guaranteed (5,000) AF
•Plus: 5,000 x 30% 1,500 AF
•Subject to cutback 16,500 AF
•Cutback x 20% (3,300) AF
•Imported Water 13,200 AF
•Plus Local 5,000 AF
•TOTAL DELIVERIES 18,200 AF
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