HomeMy WebLinkAbout2016-04-12; Municipal Water District; 832; Authorize Execution of uniform contract with San Diego County Water Authority for purchase of treated water and first amendment to reimbursement agreement for planning of flow control facilityCARLSBAD MUNICIPAL WATER DISTRICT-AGENDA BILL 12
AB# 832 AUTHORIZE EXECUTION OF THE UNIFORM CONTRACT WITH DEPT. Dl RECTOR (\J~:.'l;
DATE 04-12-16 THE SAN DIEGO COUNTY WATER AUTHORITY FOR THE GEN. COUNSEL /fS PURCHASE OF TREATED WATER FROM THE CLAUDE "BUD"
LEWIS CARLSBAD DESALINATION PROJECT, EXECUTION OF V:.:,/'
THE FIRST AMENDMENT TO THE REIMBURSEMENT
DEPT. PW-UTIL AGREEMENT FOR THE PLANNING AND DESIGN OF THE EXEC. DIRECTOR
CARLSBAD 5 FLOW CONTROL FACILITY (PROJECT NO. 5038),
AND APPROPRIATION OF FUNDS
RECOMMENDED ACTION:
Adopt a Resolution authorizing execution of the Uniform Contract between the San Diego County
Water Authority and the Carlsbad Municipal Water District for the purchase of treated water from
the Claude "Bud" Lewis Carlsbad Desalination Project.
Adopt a Resolution authorizing the execution of the First Amendment to the Reimbursement
Agreement between the Carlsbad Municipal Water District and the San Diego County Water
Authority for the planning and design of the Carlsbad 5 Flow Control Facility and pressure reducing
valve, and appropriating funds.
ITEM EXPLANATION:
On Sept. 11, 2011, the Carlsbad Municipal Water District (CMWD) Board approved an Agreement
with the San Diego County Water Authority (SDCWA) memorializing certain understandings and
establishing a framework for cooperation regarding the Carlsbad Seawater Desalination Project,
Agenda Bill No. 20,684 and Resolution No. 1426. On Nov. 27, 2012, the CMWD Board approved the
Resolution of Intent, CMWD Agenda Bill No. 761 and Resolution No. 1460, to purchase desalinated
water from SDCWA so long as it remained adequately protected as a local source, as determined
by the Board.
In 2012, SDCWA and Poseidon entered into an Agreement to purchase a minimum annual quantity
of 48,000 acre-feet of desalinated water for 30 years. SDCWA can purchase up to 56,000 acre-feet
of desalinated water per year, depending on availability. SDCWA has offered its member agencies,
including CMWD, an opportunity to contract with SDCWA for a commitment to purchase a portion
of this desalinated water. This contract is referred to as the Uniform Member Agency Purchase
Contract (Contract).
DEPARTMENT CONTACT: Wendy Chambers 760-438-2722 x7107 wendy.chambers@carlsbadca.gov
FOR SECRETARY USE. ~ BOARD ACTION: APPROVED CONTINUED TO DATE SPECIFIC D
DENIED D CONTINUED TO DATE UNKNOWN D
CONTINUED D RETURNED TO STAFF D
WITHDRAWN D OTHER-SEE MINUTES D
AMENDED D REPORT RECEIVED D
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Uniform Member Agency Purchase Contract:
The Contract reflects the following:
1. CMWD commits to purchase a fixed annual amount of SDCWA owned desalinated water
taken in 12 equal monthly purchases.
2. Member agency contracts are uniform, except as to quantity.
3. 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 SDCWA acquires the Carlsbad Desalination Plant after 30 years, CMWD will have the
option to extend the Contract for an additional 20 years.
6. CMWD must decide now whether to commit to purchase additional deliveries on a pro rata
share basis, in the event that SDCWA purchases more than the minimum 48,000 acre-feet
per year, up to a total of 56,000 acre-feet per year (calculated as CMWD's committed
purchase amount divided by 48,000 acre-feet per year times the additional purchases).
7. CMWD must pay a management fee, or incentive payment, of $10.52 per acre-foot.
8. CMWD will pay a net transportation fee of $88.97 per acre-foot (adjusted annually) if
CMWD does not construct a direct connection to the Carlsbad Desalination Pipeline, such
as the Carlsbad 5 Flow Control Facility.
Contract Quantity:
CMWD's Contract quantity is 2,500 acre-feet per Contract year. This is categorized as a local water
supply. Staff worked with SDCWA to clarify and amend the Contract language to ensure that the
2,500 acre-feet is designated as a local supply, and guaranteed as long as production quantities are
sufficient. SDCWA may decrease the quantity only under conditions where less water is produced
by the treatment plant than anticipated, or where the transmission infrastructure is incapable of
delivery due to maintenance or repair.
However, the Contract quantity may also increase under conditions where the treatment plant
produces more than anticipated. In order for CMWD to take advantage of additional production
quantities, CMWD must elect now to purchase additional water or waive their right to purchase
additional water, under Section 5 of the Contract. If CMWD elects to purchase additional water,
the maximum additional water currently estimated to be available for purchase is 416 acre-feet.
This additional water would cost significantly less than the $2,434 per acre-foot shown in Table 1.
See the Fiscal Impact section for more information.
Furthermore, SDCWA currently offers an incentive for highly reliable member agency local supplies
including this desalinated water. This incentive is currently set at 30 percent of a three-year rolling
average of beneficial use from such reliable local supplies and becomes applicable if SDCWA invokes
the Water Shortage and Drought Response Plan. As such, CMWD is currently eligible to receive an
additional 750 acre-feet of SDCWA water in times of drought (30 percent of 2,500 acre-feet) based
on SDCWA's supply allocation methodology. This incentive benefit may be eliminated or materially
reduced by SDCWA. If this occurs, CMWD has the right to terminate the Contract.
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Water Portfolio:
Desalinated water represents a new source of locally produced water that is highly reliable and
drought proof. According to the SDCWA Business Plan, seawater desalination from the Carlsbad
Desalination Project will account for 7 percent of the region's water supply portfolio by 2020, which
is about one-third of the water generated in the county.
Regional and local water portfolio management is prudent to mitigate the risks associated with
reliance on imported water. Legal, environmental, water quality, or climatic factors can create
regional supply inconsistency. Bay-Delta issues affecting SDCWA's supply of imported water and
the propensity for drought in this region increase the rislk of supply inconsistency.
If the Board elects to enter into the Contract, CMWD will diversify its water resources, reduce the
demands for imported water, and provide a drought proof supply. These benefits increase CMWD's
supply reliability which supports its mission to provide a safe, reliable water supply to support
Carlsbad residents and the city's $15 billion local economy for generations to come. With the
potential to directly purchase desalinated water, the projection for further supply diversification,
as illustrated in Charts 1 through 3 below, shows a reduction in reliance on imported supplies (from
100 percent in 1990 to a projected 59 percent by 2020).
Chart 1: 1990 Water Supply Portfolio
• SDCWA
1. Represents water purchases prior to the implementation of-the Recycled Water program. Does not
account for SDCWA supply diversification (e.g. CMWD also receives local groundwater from SOCWA).
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Chart 2: 2016 Water Supply Po rtfolio (estimated)
13%
22%
• SDCWA • Recycled Seawater Desalination
~
1. Water demand for 2016 iS based on CMWD's two-year average water sales (CY 2014 and 2015) and
assumes a full year of desalinated water is used (i.e. 2,.500 AF). Does not account for SOCWA supply
diversificatiOn (e.g. CMWD also receives blended desalinated water from SDCWA).
Chart 3: 2020 Water Supply Po rtfolio (projected)
12%
29%
• SDCWA • Recycled • Seawater Desalination
L Assumes completion of the Recycled Water Phase Ill program and sales to fun production capacity of
7,235 AFY, potable water demand as projected in the draft 201.5 Urban Water Management Plan net
with the increase in recycled water from 201.5 sales levels to production capacity and net w•th assumed
seawater desalination capacity of 2,916 AF. Does not account for SDCWA supply diversification (e.g.
CMWD also receives blended desalinated water from SDCWA).
Effect of State Emergency Water Conservation Regulations:
While the purchased desalination water is considered a local supply for the purposes of the
Contract, it is important to note that the state's initial emergency water con servation regulations
did not give CMWD conservation credit for this local supply. In February 2016, the State Water
Resources Control Board adopted revised regulations, allowing conservation credit in consideration
of factors that influence water use in different parts of the state. Some of these factors include
hotter-than-average climate, population growth, and significant investments in new local drought
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resilient water sources, such as wastewater reuse and desalination, but cap an agency's
conservation credit at 8 percent. An 8 percent credit would adjust CMWD's conservation target
from a 28 percent reduction to a 20 percent reduction from 2013 water use.
CMWD anticipates it will already receive the maximum 8 percent credit from SDCWA's regional
investment in desalination. While this is a first step towards recognizing the benefits of local
investment in drought resilient supplies, the state's current regulatory framework does not
recognize the full amount of investment in desalination, because desalinated water will represent
approximately 13 percent of CMWD's estimated calendar year 2016 water portfolio if the Contract
is executed. Additionally, the current regulations do not recognize CMWD's investments in recycled
water (which also reduces reliance on imported water), investments in locally developed supplies
prior to 2013, or regional differences (e.g. the fact that San Diego County has water due to regional
storage investments, etc., whereas Imperial Valley does not).
SDCWA has indicated the state will reassess its conservation regulations in April/May 2016 as the
state continues assessing the water conditions throughout the spring season and adapts the
requirements, as appropriate, based on water supply conditions. However, SDCWA will continue
pursuing the following issues:
• To have all investment in local supplies recognized
• To have the regional differences recognized
• To develop a comprehensive state-wide drought management plan, and
• To have the long-term drought and conservation issues moved back to the Department of
Water Resources
Even though the state's current regulations would not give additional conservation credit to CMWD
based on the additional desalinated water purchased through the Contract, the purchase of this
desalinated water is in CMWD's best interest because of the local supply portfolio diversification
and guaranteed local supply benefits. Furthermore, state regulations are likely to change over the
30 year term ofthe Contract in ways that cannot be anticipated at this time.
Direct Connection I Carlsbad 5 Flow Control Facility:
The Carlsbad 5 Flow Control Facility and pressure reducing valve would allow for direct delivery of
desalinated water to Carlsbad. CMWD's 2012 Water Master Plan recommended the construction
of Carlsbad 5 Flow Control Facility based on the Poseidon Water Purchase Agreement, which
assumed CMWD would take more water than currently provided for in the Contract (satisfying up
to 100 percent of its potable water needs). The recommendation also assumed SDCWA was not
involved in the project. The project has since changed direction. SDCWA is now the project sponsor
and CMWD will only acquire approximately 13 percent of its estimated calendar year 2016 water if
the Board approves the Contract.
Despite the change in project direction, constructing the Carlsbad 5 Flow Control Facility still affords
several benefits. First, a direct connection means CMWD is not reliant upon SDCWA's system
reliability. For example, an earthquake affecting the SDCWA first or second aqueduct wouldn't
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affect CMWD's direct desalination connection. Second, constructing the direct connection
eliminates the net transportation charge shown in Table 1 of the Fiscal Impact section (see Fiscal
Impact section for more information). Lastly, a direct connection affords the possibility of additional
uses in the future. For example, hydro-electric generation and the direct sale of desalinated quality
water to specialized users (e.g. bio-tech) has been discussed in conjunction with a desalinated water
direct connection. While the feasibility of these possibilities has not been explored, they are not an
option without a direct connection.
SDCWA will perform the services required to plan, design, and construct the flow control facility.
The project requirements include property acquisition, environmental assessment and potential
mitigation, securing the required permits and obtaining site access. The proposed flow control
facility and pressure reducing valve will include the installation of new piping, isolation, pressure
reducing and control components, instrumentation, metering and construction of structures to
house the mechanical and electrical equipment.
In order to proceed with the design and ultimate construction ofthe flow control facility, the Board
must enter into an Amendment to the original Agreement for a planning study. The Amendment is
required for additional planning and design work due to a change in location for the flow control
facility, the addition of a pressure reducing valve, and other design work associated with the project.
The Amendment also revises the title of the Agreement and facility name to "Reimbursement
Agreement between the Carlsbad Municipal Water District and the San Diego County Water
Authority for the Planning and Design of the Carlsbad 5 Flow Control Facility and Pressure Reducing
Valve" (Reimbursement Agreement Amendment).
Based on design timeline estimates from SDCWA, staff anticipates returning to the Board in
approximately 12 to 18 months for Board consideration of the Amendment necessary to allow
SDCWA to construct the flow control facility.
Recommendation:
Staff believes the Contract is consistent with the Resolution of Intent. The Board may authorize
execution of the Contract without authorizing execution of the Reimbursement Agreement
Amendment. Staff, however, recommends the purchase of desalinated water, the purchase of
additional water as available from SDCWA, and the Reimbursement Agreement Amendment to
complete the design of the Carlsbad 5 Flow Control Facility for the following reasons:
• The desalinated water is designated as a new guaranteed local water source.
• The purchase of desalinated water will assist in meeting demands under drought conditions.
• The purchase of desalinated water will further diversify CMWD's water portfolio and will
enhance supply reliability.
• Membrane technology has improved in recent years, leading to more efficient plant
production. Therefore, under conditions where the plant produces more than anticipated,
CMWD will have the ability to purchase more than the 2,500 acre-feet per year Contract
quantity. Under the Contract, purchasing more than the 2,500 acre-feet per year will allow
for lower purchase rates to CMWD.
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• The construction of the Carlsbad 5 Flow Control Facility and pressure reducing valve
increases supply reliability, eliminates the net transportation charge which creates ongoing
benefits, and affords the possibility of additional uses in the future.
The final Contract is presented and attached for Board approval (see Exhibit 1, Attachment A).
The Reimbursement Agreement Amendment is presented and attached for Board approval (see
Exhibit 2, Attachment A).
FISCAL IMPACT:
Table 1 provides a breakdown of the costs associated with the Contract. Each ofthese costs include
fixed and variable components.
1. Costs were provided by SDCWA in the Dec. 28, 2015 letter titled Notice of Fiscal Year 2016 Unit Prices for Delivery
of Local Water from the Carlsbad Desalination Project. Rounding may occur. This letter is attached as Exhibit 3.
2. The Carlsbad 5 Flow Control Facility and Pressure Reducing Valve Project provides for a direct desalinated water
connection. Therefore, if that project is approved and constructed, the requirement for CMWD to pay the
transportation charge will be eliminated.
The calendar year 2016 approved water rates have taken into account the full cost of desalinated
water shown in Table 1. The final costs shown in Table 1 are approximately $57 per acre-foot lower
than the estimates. This difference will help hedge against future desalination water rate increases
or be used to decrease rates. How the difference will be used depends on the projected rate
increase and funded level of reserves.
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Additional Water Deliveries:
If the Board elects to enter into the Contract and also elects to purchase additional desalinated
water quantities as they become available, the estimated acre-foot cost of the water decreases
because additional purchases do not include the capital charges, fixed operating charges, fixed
electricity charges, pipeline costs, capital oversight costs, and administrative charges shown in Table
1. These SDCWA costs are fully covered with CMWD's purchase of the 2,500 acre-feet.
CMWD is only entitled to receive 5.21 percent of any additional desalination water produced as that
is CMWD's pro rata share of the initial 48,000 acre-feet. Previous estimates indicate there may be
an additional 8,000 acre-feet of production capacity. If 8,000 additional acre-feet are produced,
CMWD would be entitled to 416 acre-feet, or 5.21 percent, of that additional quantity.
Consultant Gordon Hess and Associates, Inc. (Gordon Hess) developed an analysis to demonstrate
the decrease in per-acre-foot rate as additional desalination water was purchased. Purchasing an
additional 208-acre-feet of water, or 2,708 acre-feet in total, reduces the cost to approximately
$2,305 per acre-foot. Purchasing an additional 416-acre-feet of water, or 2,916 acre-feet in total,
reduces the cost to approximately $2,195 per acre-foot. As noted previously, staff recommends
purchasing the additional water as available.
Long Term Forecasts:
Staff requested that Gordon Hess update some of the 2012 projections, which were included in
Agenda Bill No. 761 regarding the Resolution of Intent and the report titled 2012 Desalination Water
Rate Analysis for the Carlsbad Municipal Water District. The following data was updated:
• Only the 2012 "no-stress" cases were updated. The no-stress cases were the baseline
projections which used cost and inflator assumptions based on the Carlsbad Seawater
Desalination Project Water Purchase Agreement between SDCWA and Poseidon Resources
LP, and deemed to be most likely.
• The 2012 estimated desalinated water costs were updated to those shown in Table 1.
• The 2012 estimated SDCWA rates and charges were updated to calendar year 2016 rates
and charges.
• The growth rate assumptions from 2012 were used in the updated projections.
• The update includes the net transportation charge in an additional analysis.
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Chart 4 below is an update of the chart shown in Agenda Bill No. 761 which projected a crossover
point where the cost of SDCWA supply exceeds the cost of the Contract desalinated water in 2026.
Similar to the chart in Agenda Bill No. 761, Chart 4 assumes the Carlsbad 5 Flow Control Facility is
constructed, thereby eliminating the net transport-ation charge. In Chart 4, the cost of water
purchased from SDCWA is projected to exceed the cost of desalinated water under the Contract in
2029.
The crossover point changed primarily because of lower than projected SDCWA rates and charges.
The difference in estimated desalinated water costs between the projected and actual created no
material impact to the crossover point. If the crossover point occurs in 2029, the cost of desalinated
water would be lower than the SDCWA cost of water for the remaining 17 years of the Contract.
$6,000
$5,000
$4,000
$3,000
$2,000
I
I $1,000
$-
-+-SDCWA
Chart 4: Cost Per Acre Foot [$/AF]
(Without Net Transportation Charge)
......._Desai.
----------
' ' ' ' ' I l ~~oomOMNM~~~~OOmOM~M~~~~OOmOMNM~~ M M rl rl N N N N N N N N N N M M m M M M M M M M ~ ~ ~ ~ ~ ~ o o o o o o o o o · o o o o o o o o o o o o o o o o o o o o o l NNNNNNNNNNNNNNNNNNNNNNNNNNNNNN
Chart 5 on the following page is the same as Chart 4, except that it includes the net transportation
charge based on the assumption that the Carlsbad 5 Flow Control Facility Is not constructed. The
addition ofthe net transportation charge moves the crossover point out to 2035. Thus, the cost of
desalinated water would only be lower than the SDCWA cost of water for the remaining 11 years of
the Contract.
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$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$-L
\D "' rl rl 00 N N
-+-SDCWA
com 0 ..... N ..... ..... N N N 0 0 0 0 0 N N N N N
Chart 5: Cost Per Acre Foot ($/AF]
(With Net Transportation Charge) ~-------------------
---Desai.
('() """ 1./) \D "' 00 ()) 0 ..... N ('() """ 1.1)\D "' 00 ()) 0 rl N ('() <:t 1./)
N N N N N N N ('() ('() ('() ~ ('() m m m m m """ """ """ """ g """ 0 0 0 0 0 0 0 0 0 0 0 00 0 0 ~ 00 0 0 0
N N N N N N N N N N f'l N N N N N N N N N N N
These charts represent the crossover points under a "tno-stress" case. Should the future mirror the
variables of the "stress" and "extra-stress" cases from 2012, the crossover point would be much
later. The stress case decreased the escalation of the SDCWA transportation and supply rate
throughout the 30 year project period. The extra-stress case included the stress case adjustments
and also increased the cost of desalinated water (non-power costs) 0.88 percent per year
(compounded) throughout the 30 year project. Furthermore1 changes in any of the underlying
assumptions (e.g. SDCWA rates and charges growth rate, electricity growth rate, etc.) has the ability
to change the crossover point.
Direct Connection I Carlsbad 5 Flow Control Facility:
The Carlsbad 5 Flow Control Facility and pressure reducing valve would allow for direct delivery of
desalinated water to Carlsbad. Constructing the Carlsbad 5 Flow Control Facility eliminates the net
transportation charge shown in Table 1. lfthe flow control facility is constructed, CMWD's per acre-
foot rate would be $2,344.91, a savings of $88.97 per acre-foot.
The cost of directly connecting to the desalination facility translates to approximately $51 per acre-
foot. This estimate assumes it will cost approximately $2.8 million dollars to design and construct
the flow control facility and pressure reducing valve, a capital recovery factor based on 2.12 percent
interest over 30 years, and 2,500 acre-feet of water is consumed. The 2.12 percent interest is the
average expected return on the Treasurer's portfolio over the next 10 years.
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The average growth rate in the SDCWA transportation charge over the past three years was 4.13
percent. Further1 the high-rate scenario forecast in the SDCWA long-Range Financing Plan for the
compounded growth in the all-in rate, of which the transportation charge is a component, is 4.70
percent. Gordon Hess assumed an average increase of 4. 75 percent.
Assuming the desalination transportation charge were to grow at four percent peryear, the payback
period for constructing the Flow Control Facility is approximately 16 years. A more aggressive
grc;>wth rate would decrease the payback period.
The industry standard useful life for a Flow Control Facility is 50 years. This estimate mirrors real
world conditions. For example, Carlsbad 1 Flow Control Facility was constructed in 1959. The
Carlsbad 6 Flow Control Facility is being constructed in 2016 to replace Carlsbad 1 Flow Control
Facility. Therefore, Carlsbad 1 Flow Control Faci lity experienced a 58 year useful life. Assuming that
the desalinated water direct connection has a 50 year useful life, which coincides with the 30 year
Contract term, plus potential 20 years extension, and the discount rate is 2.12 percent, the present
value (PV} of 35 years of positive cumulative cash flows is $11.6 million. Further, the internal rate of
return (IRR) is 8.65 percent over the 50 year investment life. Alternatively, assuming the desalinated
water direct connection is only used for 30 years, which coincides with the 30 year Contract with no
extension, and the discount rate is 2.12 percent, the PVof 15 years of pos~tive cumulative cash flows
is $3.7 million. The IRR in this case is 6.69 percent over the 30 year investment life.
In either scenario, the initial investment is paid back within 16 years and CMWD realizes additional
benefits in the form of avoided net transportation costs over the remaining life. Chart 6 below
summarizes this information.
Chart 6: Carlsbad 5 Flow Control Facility Break,.£ven Point
25,000,000
2.0,000,000
PV: $11.6 million
15,000,000 IRR:8.65%
10,000,000
5,000,000
-.-cumulative cash Flows (Cash Investment Less Net Savings)
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Changes in any of the underlying assumptions (e.g. construction cost, capital recovery factor,
discount rate, etc.) has the ability to affect the break-even point and the present value of any
savings.
Staff estimates the planning and design work, environmental, and land acquisition will cost
approximately $1,014,300 of the estimated $2.8 million project. Staff is requesting the Board
appropriate $1,014,300 from the Water Connection Fee Fund for the design of Carlsbad 5 Flow
Control Facility and Pressure Reducing Valve Project (Project No. 5038). Sufficient funds are
available for the request. Staff anticipates returning to the Board in 12 to 18 months for
consideration of another Amendment to the Reimbursement Agreement necessary to authorize
construction of the Carlsbad 5 Flow Control Facility.
ENVIRONMENTAL IMPACT:
A Final Environmental Impact Report (FEIR 03-05 SCH No. 2004041081) was prepared for the
Desalination Plant Project and certified by the City Council at its June 13, 2006 meeting in
compliance with the California Environmental Quality Act (CEQA) Guidelines Section 15090. Since
that time, a third Addendum to the FEIR was adopted by the Planning Commission (Resolution No.
7018) at its Nov.6, 2013 meeting. The purchase of treated water from SDCWA is within the scope
ofthe FEIR (03-05(B)) and no further environmental review is required.
PUBLIC NOTIFICATION:
None required.
EXHIBITS:
1. Resolution authorizing execution of the Uniform Contract with the San Diego County Water
Authority for the purchase of treated water from the Claude "Bud" Lewis Carlsbad
Desalination Project.
2. Resolution authorizing execution of the First Amendment to the Reimbursement Agreement
between the Carlsbad Municipal Water District and the San Diego County Water Authority for
the Planning and Design of the Carlsbad 5 Flow Control Facility and Pressure Reducing Valve and
appropriating funds.
3. Location Map.
4. Notice of Fiscal Year 2016 Unit Prices for Delivery of Local Water from the Carlsbad
Desalination Project.
5. Resolution No. 1460 expressing intention to enter into Uniform Contract for purchase of
treated water from the San Diego County Water Authority-Carlsba{] Desalination Project.
6. Reimbursement Agreement between the Carlsbad Municipal Water District and the San Diego
County Water Authority for the Carlsbad 5 Service Connection Facility Planning Study (May 12,
2014).
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RESOLUTION NO. 1547
A RESOLUTION OF THE BOARD OF DIRECTORS OF CARLSBAD
MUNICIPAL WATER DISTRICT AUTHORIZING EXECUTION OF THE
UNIFORM CONTRACT WITH THE SAN DIEGO COUNTY WATER
AUTHORITY FOR THE PURCHASE OF TREATED WATER FROM THE
CLAUDE "BUD" LEWIS CARLSBAD DESALINATION PROJECT
EXHIBIT 1
WHEREAS, on Nov. 27, 2012, the Carlsbad Municipal Water District (CMWD) Board
adopted Resolution No. 1460, a Resolution of Intention to purchase 2,500-acre feet per year of
desalinated water from SDCWA, "so long as it remains adequately protected as a local source as
determined by the Board"; and
WHEREAS, the CMWD Board finds that the Uniform Contract between the San Diego
County Water Authority and the Carlsbad Municipal Water District for the purchase of treated
water from the Claude "Bud" Lewis Carlsbad Desalination Project (Contract) adequately
protects the desalinated water purchased under that Contract as a local source; and
WHEREAS, the San Diego County Water Authority desires to enter into the Contract.
NOW, THEREFORE, BE IT RESOLVED by the CMWD Board of Directors of the City of
Carlsbad, California, as follows that:
1. That the above recitations are true and correct and incorporated herein.
2. That the CMWD President is authorized and directed to execute the Contract attached
hereto as Attachment A.
3. That CMWD elects to commit to purchase additional product water made available by
the Water Authority according to Sections 9 and S(c) of the Contract.
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PASSED, APPROVED AND ADOPTED at a Special Meeting of the Carlsbad Municipal
Water District Board of the City of Carlsbad on the 12th day of April, 2016, by the following
vote, to wit:
AVES: Board Members Hall, Wood, Schumacher, Blackburn, Packard.
NOES: None.
ABSENT: None.
ATIEST:
BARBARA ENGLESO ; SECRETARY
(SEAL)
ATIACHMENT A (to Exhibit 1)
UNIFORM CONTRACT BETWEEN
THE SAN DIEGO COUNTY WATER AUTHORITY
AND THE CARLSBAD MUNICIPAL WATER DISTRICT
FOR THE PURCHASE OF
TREATED WATER FROM THE CLAUDE "BUD" LEWIS 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 County Water Authority and Poseidon Resources (Channelside) LP dated December 20,
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 December 20, 2012" (Poseidon DBA). Together the Poseidon WPA and
the Poseidon DBA will provide new facilities for the production and conveyance 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, and it also has
undertaken improvements and modifications to its aqueduct system and the Twin Oaks Valley
Water Treatment Plant for purposes of taking delivery 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, of 48,000 acre-feet and is required to take
delivery of, purchase, and pay for that amount of desalinated water to the extent it is produced
and made available for delivery according to the terms of that 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 uniform contracts to make firm
commitments to individually purchase from the Water Authority treated water in designated
amounts that represent a portion of the Minimum Annual Demand Commitment. In addition, the
Water Authority has the option to take Additional Product Water Deliveries 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 uniform contracts for member agency purchase of treated water in connection
with the Carlsbad Desalination Project.
The parties intend that the purchase and payment obligations of the member agencies
under the uniform contracts reasonably match the purchase and payment obligations 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 facilities
1
that would come within the definition of an Excused Demand Shortfall under the Poseidon WPA
in a manner similar to the Water Authority's obligations for such payments. Similarly,
contracting member agencies will share the benefit of Drought Shortfall Payments, if any, made
under the Poseidon WPA should a failure to make deliveries occur in times of a water supply
shortage. The parties acknowledge that the water provided by the Water Authority under the
uniform contracts will be treated water from 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 treated water of the Water Authority without blending with desalinated water or,
in some limited cases, direct delivery 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 The Carlsbad Municipal Water
District ("Member Agency"). The Member Agency and the Water Authority may enter into an
agreement for the design, construction and operation of new facilities that will allow for the
direct delivery of desalinated water to the Member Agency.
3. Initial Term and Option to Extend
(a) This contract is effective on the date it is fully executed and will continue for an
Initial Term until the earlier of either (a) 30 years following Commercial Operation as defined in
the Poseidon WP A or the Expiration Date of the Poseidon WPA as defined therein, 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 of the Poseidon WP A 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 WP A is a condition
precedent to the obligations of the parties under this contract.
5. Contract Quantity
(a) The Member Agency's Contract Quantity is 2,500 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 WP A.
(b) The Total Contracted Quantity of water subject to uniform contracts, including
this contract, is 6,000 acre-feet of treated water per Contract Year. If a member agency having
executed a uniform contract subsequently chooses to early terminate its contract pursuant to
section 10 or a member agency contract is terminated as a consequence of breach by the member
agency, the Total Contracted Quantity will be reduced in the amount of that member agency's
2
Contract Quantity after making the contracted amount available in part or in whole, at the Water
Authority's sole discretion, to any other member agency having executed a uniform contract.
The Total Contracted Quantity will be reduced in the amount of that member agency's Contract
Quantity less the amount committed to other contracted member(s) pursuant to this section.
(c) The Member Agency's Contract Quantity and the Total Contracted Quantity are
part of the Minimum Annual Demand Commitment of the Water Authority under the Poseidon
WPA. In addition, under the Poseidon WPA the Water Authority has the option to take
Additional Product Water Deliveries. With respect to Additional Product Water Deliveries, the
Member Agency: will purchase Additional Product Water made available by the Water
Authority according to the provisions of section 9: YES __ I NO __ ; waives any
participation in the purchase of Additional Product Water: YES __ I NO __ .
(d) Under the Poseidon WPA, the Water Authority has a right to make an elective
decrease in the Minimum Annual Demand Commitment based on the performance testing prior
to Commercial Operation of the desalination plant. If the Water Authority elects to reduce the
Minimum Annual Demand Commitment pursuant to the Poseidon WPA, the Total Contracted
Quantity will be reduced so that the reduced Total Contracted Quantity bears the same ratio to
the reduced Minimum Annual Demand Commitment as the amount specified in subparagraph (b)
of this section bears to 48,000 acre-feet, and the Contract Quantity of each member agency
having a uniform contract will be reduced to maintain the ratios of their respective Contract
Quantities and the Total Contracted Quantity. The Water Authority will give notice to each
member agency of the reductions, and once given, the reduced quantities will be used for all
purposes of this contract and the other uniform contracts.
6. Purchase and Delivery
(a) The Member Agency will purchase and the Water Authority will deliver the
Contract Quantity as monthly deliveries of treated water equal to one-twelfth of the Contract
Quantity.
(b) Purchase and delivery of the Contract Quantity will commence on the first day of
the calendar month following execution of the Uniform Agreement. For the first Contract Year
of Commercial Operation the Contract Quantity will be one-twelfth of the Contract Quantity
times the number of full months following Commercial Operation remaining in the Contract
Year.
(c) Daily water orders will be subject to the Water Authority's rules and regulations
generally applicable to the ordering and delivery of treated water.
(d) If at any time the Water Authority reasonably determines that it will receive
desalinated water pursuant to the Poseidon WP A 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 other failure of performance under the Poseidon
WP A, the Member Agency will purchase from the Water Authority and the Water Authority will
delivery to the Member Agency an Adjusted Contract Quantity for that year in an amount
determined by the following formula: x = ~ x [~ X c]; where a is the Member Agency's
Contract Quantity, b is the Total Contracted Quantity, cis the amount of desalinated water the
Water Authority reasonably expects to actually receive pursuant to the Poseidon WPA in that
3
Contract Year, dis the Minimum Annual Demand Commitment and xis the Adjusted Contract
Quantity. The purchase and delivery will be in monthly deliveries of treated water equal to one-
twelfth of the Adjusted Contract Quantity. If an adjustment is made after the commencement of
a Contract Year, the Adjusted Contract Quantity for the remainder of the Contract Year will take
effect at the beginning of the next month following the Water Authority's notice to the Member
Agency of the adjustment under this paragraph.
(e) If at any time the Water Authority reasonably determines that it will receive less
than the Total Contract Quantity or the sum of the Adjusted Contract Quantities in a Contract
Year under the Poseidon WP A because a relief from performance due to the existence of an
Uncontrollable Circumstance, or because of a default, breach, or other failure of performance
under the Poseidon WPA, the Water Authority's obligation to deliver 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
delivered 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 the sum of the Adjusted Contract Quantities.
(f) The Member Agency and the Water Authority may enter into a separate
agreement for the design, construction, and operation of new connection facilities to the pipeline
described in the Poseidon DBA that will allow for the direct delivery of desalinated water to the
Member Agency. If the Water Authority is unable to directly deliver desalinated water to the
Member Agency due to a shutdown of Water Authority facilities, the Water Authority is excused
from performance of its delivery obligations for the duration of the shutdown; however, the
Water Authority will provide make-up water during the Contract Year, or at a later period as
agreed between the Water Authority and the Member Agency, in amounts equal to the quantity
of desalinated water that would have been delivered had the shutdown not occurred. Also, the
Water Authority, at its discretion, may deliver treated water through other connections to the
Member Agency in lieu of interrupting delivery of desalinated water, which treated water
deliveries will be deemed to be deliveries of desalinated water for all purposes under this
agreement and for which payment will be made in the same manner as for direct delivery.
Further, if desalinated water is available but the Member Agency is unable to accept direct
delivery of desalinated water through the new facilities, it will accept delivery of treated water by
the Water Authority through other connections to the Member Agency in lieu of direct delivery
of desalinated water; in addition to payment of the amount applicable to direct delivery of
desalinated water, such delivery will be subject to payment of the Transportation Charge, or an
equivalent charge, under the Water Authority rate structure in effect at the time of the delivery
subject to the adjustments described in Section 8, paragraph (a)(2) and Exhibit B.
(g) The Water Authority's obligation to deliver water will be relieved and the
Memlber Agency's obligation to purchase will be suspended for the duration of a Product Water
Purchase Relief Event as defined in the Poseidon WP A.
(h) The Member Agency's obligation to purchase water will be relieved and the
Water Authority's obligation to deliver water to the Member Agency will be suspended during
the period of a Member Agency Water Purchase Relief 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, unpredictable event resulting in a condition closing all or a portion of
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the Member Agency's treated water facility 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 application of all Water
Authority ordinances, plans, programs, rules, and regulations. Except as specified in this
contract, the parties shall not modify the Contract Quantity.
(b) The Contract Quantity will be treated as a "local supply" pursuant to the Water
Authority's Water Shortage and Drought Response Plan and will be eligible for the Local
Projects Development Adjustment under the Water Authority's Supply 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 applicable yearly accounting period because of an
authorized suspension of deliveries 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 ability 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 Water Authority supplies in time of shortage or otherwise, provided
that the Water Authority complies with paragraph (a) ofthis section. If the Water Authority
amends, replaces, or repeals the Plan or the Methodology to eliminate or materially reduce the
local supply benefit (i.e., which is a positive adjustment for highly reliable member agency local
supplies and currently is set at 30% of a rolling three-year average of beneficial use from such
reliable local supplies), 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
Desalination Project Costs described in paragraph (1) (A) and (B). When payment of an adjusted
Transportation Charge is required under paragraph (f) of section 6, the adjustments to
Transportation Charge will be made as described in paragraph (2).
( 1) Unless the circumstance described in paragraph (b) of this section has
occurred, the portion of the unit price attributable to Desalination Project Costs will be
determined and apportioned by the Water Authority on a per-acre foot unit price basis:
(A) For each acre-foot of the Contract Quantity delivered in a month the
Member Agency will pay the Fixed Unit Price and the Variable Unit Price, plus any Direct
Payments, determined for that month pursuant to Article 17 of the Poseidon WP A. For each
Unexcused Demand Shortfall Unit attributed to the Member Agency the Member Agency will
pay the Fixed Unit Price determined for that month pursuant to Article 17 of the Poseidon WP A.
As used in this contract, an Unexcused Demand Shortfall Unit attributed to the Member Agency
means any failure to take treated water equal to one-twelfth the Member Agency's Contract
5
Quantity unless the failure is due to a Member Agency Water Purchase Relief Event as defined
in paragraph (g) of section 6.
(B) For each acre-foot of the Contract Quantity delivered in a month and
for each Unexcused Demand Shortfall Unit attributed to the Member Agency the Member
Agency will 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 of the
obligations of the Water Authority under the Poseidon DBA, including refinancing agreements,
apportioned on a per acre foot basis over the Minimum Annual Demand Commitment under the
Poseidon WPA; plus (b) the operation and maintenance costs (including without limitation
reasonable reserves for repair or replacement) for the facilities that are the subject of the
Poseidon DBA determined according to the Water Authority's adopted budget for the fiscal 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 WP A.
(C) For each acre-foot of the Contract Quantity delivered in a month and
for each Unexcused Demand Shortfall Unit attributed to the Member Agency the Member
Agency will pay for the reimbursement of its proportionate share of the Water Authority's
project oversight costs during the design, construction and commissioning of the Carlsbad
Desalination Project prior to the date of Commercial Operation as described in Exhibit A.
(D) The components of the unit price for the Desalination Project Costs
and for the Water Authority capital and operating costs related to the Carlsbad Desalination
Project are shown on Exhibit A.
(2) When the Member Agency is required to pay transportation costs for treated
water delivered in lieu of direct delivery of desalinated water pursuant to paragraph (f) of section
6, then in addition to the charges paid under paragraph (a)( I), for each acre-foot of the Contract
Quantity delivered in a month the Member Agency will pay a unit price determined by the
Water Authority based on an adjusted Transportation Charge, or an equivalent charge, under the
Water Authority rate structure in effect at the time of the delivery, which will be calculated in
such a manner to reflect only the proportion of costs of the desalinated water conveyance
pipeline attributable to the Water Authority's proportion of desalinated water deliveries after
subtracting the amounts determined under paragraph (l)(B) paid by the all member agencies
having uniform contracts as part of the unit price attributable to Desalination Project Costs. The
adjustments will include an appropriate additional reduction to the account for the Member
Agency's payments under paragraph (1) (B) and an increase to account for chemical injection at
the Twin Oaks Valley Water Treatment Plant to boost chloramines residual. The components of
the adjustments to the Transportation Charge are shown on Exhibit B. Because the Member
Agency pays the Desalination Project Costs in connection with treated water deliveries in lieu of
direct deliveries of desalinated water, the Water Authority will not charge any other supply or
treatment costs for those supplies.
(b) If the Water Authority acquires the Carlsbad Desalination Plant in accordance
with [he Poseidon WPA, the portion of the Carlsbad Desalination Project Costs that are
determined under paragraph (1 )(A) of paragraph (a) will be redetermined by the Water Authority
board of directors based upon the full cost (including without limitation, capital, debt service,
acquisition, operation, maintenance, administrative overhead, depreciation, reserves) of the
Water Authority's ownership, operation, and maintenance of the plant.
6
(c) In addition to the unit price determined according to subsections l(A), (B), and
(C), the Member Agency will pay an annual Administration Charge calculated in the Initial
Contract Year. The Administrative Charge components are described in Exhibit A. The
Administrative Charge will be Index Linked as defined in Article 1 of the Poseidon WPA and
will be adjusted each Contract Year after the first full Contract Year. The Administration Charge
will be apportioned and collected as an additional unit charge for each acre-foot of the Contract
Quantity delivered in a month and for each Unexcused Demand Shortfall Unit attributed to the
Member Agency.
(d) The Water Authority will rebate to the Member Agency a share of any Drought
Shortfall Payments received by the Water Authority pursuant to the Poseidon WPA based on the
ratio of the Member Agency's Contract Quantity to the Minimum Annual Demand Commitment.
(e) If the amount of water received by the 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 delivered in that month will be reduced to reflect
the ratio of the 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 administrative charge may include additional charges to recover additional
costs paid by the Water Authority for Base Product Water Deliveries pursuant to the Poseidon
WP A for the prior fiscal year that were not recovered in the cumulative payment<; of the unit
price for that prior year, or credits to allocate the benefit of payments received by the Water
Authority pursuant to the Poseidon WPA for the prior fiscal year.
(g) Nothing in this contract precludes the Water Authority from establishing or
excuses the Member Agency from paying any other non-discriminatory fee or charge generally
applicable to Water Authority member agencies, except that the Contract Quantity will not be
used to calculate the Member Agency's customer service or storage charges under the Water
Authority rate structure in existence on the date of this contract or any similar future rate
structure of the Water Authority.
(h) The Water Authority will determine and give written notice to the Member
Agency of the actual unit price for the Contract Year of the Commercial Operation Date as soon
as reasonably feasible after the Water Authority determines the prices in accordance with
paragraphs (a) and (c) of this section. At the time of the written notice, the Water Authority will
provide the Member Agency with a written description of the basis of the determination,
including budget data and information. Within fifteen days thereafter, the Member Agency may
dispute the determination by giving written notice to the Water Authority of the grounds for the
dispute. The Water Authority and the Member Agency will meet in good faith to resolve the
dispute within thirty days. The Member Agency will pay the price determined by the Water
Authority until the dispute is resolved, and if a different price is mutually agreed as a result of
the dispute process, the Member Agency may claim a refund. For each Contract Year following
the Initial Contract Year, the Water Authority will determine and give notice to the Member
Agency of the unit price for a Contract Year on or before September 1 of each year. The notice
will be given in writing and include a brief description of the basis of determination consistent
with paragraphs (a) and (c).
7
(i) The unit price for water deemed delivered in a calendar month is due on the 15th
day of the following month in accordance with the Water Authority's billing practices applicable
to water delivery generally. The Administrative Charge is payable in twelve equal monthly
installments due on the 15th day of each month. Delinquent payments are subject to the same
policies, including provisions or payment of interest and penalties, established by the Water
Authority for billing and collection of fees, rates, and charges generally
(j) If the Water Authority received grants or other incentive payments from any
federal, state, or local government agency to defray all or any portion of the Desalination Project
Costs, the Water Authority will rebate to the Member Agency a share of any such grant or
incentive payments based on the ratio of the Member Agency's Contract Quantity to the
Minimum Annual Demand Commitment."
9. Additional Product Water
Additional Product Water will 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 tbe
Poseidon WP A. As it is received, the Additional Product Water will be delivered to each
participating member agency as treated water at the same price paid by the Water Authority for
that water under the Poseidon WPA; in addition the Member Agency will pay the Aqueduct Cost
pursuant to paragraph (a) (2) of section 8 for each acre-foot of water delivered. Additional
Product Water made available to the Member Agency will be treated as a local supply as
provided in section 7.
I 0. Early Termination
(a) If the Water Authority acquires the Carlsbad Desalination Plant pursuant to the
Poseidon WP A, other than pursuant to the provisions for transfer upon expiration of the term of
that agreement, the Member Agency will have 90 days after the date of such acquisition to
terminate this contract by giving written notice to the Water Authority. The Member Agency
will be deemed to have waived the provisions of this section if it does not deliver the written
notice to the Water Authority within 90 after the date of acquisition.
(b) If the Water Authority amends, replaces, or repeals the Water Shortage and
Drought Response Plan or Supply Allocation Methodology to eliminate or materially reduce the
local supply benefit (i.e., which is a positive adjustment for highly reliable member agency local
supplies and currently is set at 30% of a rolling three-year average of beneficial use from such
reliable local supplies), the Member Agency will have 90 days after notice of the amendment,
replacement, or repeal to terminate this contract by giving written notice to the Water Authority.
The Member Agency will be deemed to have waived the provisions of this section if it does not
deliver the written notice to the Water Authority within 90 days.
8
11. Entire Agreement
This contract constitutes the entire understanding among the parties with respect to the
matters set forth herein, and supersedes all 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 obligations of each party constitute consideration for the covenants
and obligations of the other parties and that the provisions of this contract cannot be severed one
from the other without affecting the respective and mutual benefits to be obtained by the parties
from 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 WP A, the Poseidon DBA, and any agreements relating to the financing, construction,
reconstruction, 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 will be considered an amendment to this or any of the
uniform contracts.
14. Construction
This contract constitutes a fully-negotiated agreement among commercially sophisticated
parties, each assisted by legal counsel, and the terms of this contract shall not be construed 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 shall not be
used for the interpretation of the provisions of this contract.
15. Controlling Law
This contract shall be governed by, and construed and interpreted in accordance with, the
laws of the State of California, without giving effect to any choice-of-law or conflicts-of-laws
rule or principle that would result in the application of any other laws.
16. Notices
Any notice, approval, consent, waiver or other communication required or permitted to
be given or to be served upon any party in connection with this contract shall be in writing. Such
notice shall be personally served, sent by facsimile, sent prepaid by registered or certified mail
with return receipt requested, or sent by reputable overnight delivery service, such as Federal
Express, and shall be deemed given: (a) if personally served, when delivered to the Party to
whom such notice is addressed; (b) if given by facsimile, when sent, provided that the
confirmation sheet from the sending fax machine confirms that the total number of pages were
successfully transmitted; (c) if given by prepaid or certified mail with return receipt requested,
9
on the date of execution of the return receipt; or (d) if sent by reputable overnight delivery
service, such as Federal Express, when received. Such notices shall be addressed to the party to
whom such notice is to be given at the address specified below or as such party shall 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 sufficient to effect giving a notice to the principal party, and a failure to give such a
courtesy copy of a notice does not constitute a failure to give notice to the principal party.
To the Water Authority:
With a copy to:
To the Member Agency:
With a copy to:
17. Cumulative Rights Waiver
San Diego County Water Authority
4677 Overland A venue
San Diego, CA 92123
ATTN: General Manager
San Diego County Water Authority
4677 Overland A venue
San Diego, CA 92123
ATTN: General Counsel
Carlsbad Municipal Water District
5950 El Camino Real
Carlsbad, CA 92008
ATTN: Executive Director
City of Carlsbad
Carlsbad Municipal Water District
1200 Carlsbad Village Drive
Carlsbad, CA 92008
A TIN: General Counsel
The rights created under this contract, or by law or equity, shall 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 right, shall not be construed 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
right 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
construed to be a waiver of any other breach of that provision or of any breach of any other
provision of this contract. The failure of any party to insist upon strict adherence to any term of
this contract on one or more occasions shall 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.
10
18. No Third Party Beneficiaries
This contract does not create, and shall not be construed to create, any rights enforceable
by any person, partnership, corporation, joint venture, limited liability company or other form of
organization or association of any kind that is not a party to this contract. Nothing in this
contract shall be construed to make the Member Agency a third party beneficiary of the Poseidon
WPA.
19. Execution in Counterparts; Facsimile Signatures
This contract may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument. The signature
page of any counterpart may be detached therefrom without impairing the legal effect of the
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 the other parties may rely upon the facsimile signature of a party on this contract as
constituting a duly authorized, irrevocable, actual, current delivery of this contract as fully as if
this contract contained the original ink signature of the party supplying a facsimile signature.
20. Time of the Essence
Time is of the essence of each and every provision of this contract.
21. Proof of Authority
Each party shall deliver to the other party copies of such resolutions, certificates or
written assurances evidencing authorization to execute, deliver, and perform this contract.
22. Number, Gender
Where a word or phrase is defined in this contract, its other grammatical forms have a
corresponding meaning. As used herein, and as the circumstances require, the plural term shall
include the singular, the singular shall include the plural, the neuter term shall include the
masculine and feminine genders, the masculine term shall include the neuter and the feminine
genders, and the feminine term shall include the neuter and the masculine genders.
23. Relationship
Nothing in this contract shall be deemed to constitute either party a partner, agent or legal
representative of the other party. No liability or benefits, such as workers' compensation,
pension rights or liabilities, other provisions or liabilities arising out of or related to a contract for
hire or employer/employee relationship, shall arise or accrue to any party's agent or employee as
a result of this 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.
24. 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 shall bear its own attorneys' fees and
costs, unless the parties otherwise agree.
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25. Assignment
Neither the Member Agency nor the Water Authority will assign any of its rights,
interests, or obligations under this contract, except that upon a governmental reorganization the
obligations of a party under this contract will be transferred to the successor agency.
26. Limitation of Liability
The Water Authority shall not be liable to the Member Agency for any monetary
damages of any kind or nature whatsoever, whether based on contract, warranty, tort (including
negligence or strict liability), or otherwise, resulting from the failure to deliver 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.
27. Force Majeure
The performance of the Water Authority's obligation to deliver and the Member Agency's
obligation to purchase the Contract Quantity is excused to the extent and for the duration that the
performance is prevented by: acts or failure to act by any government agency or authority (other
than the Water Authority or the Member Agency); natural disaster such as earthquake, fire, or
flood; war; labor strike or lockout; riots, insurrection, rebellion, acts of the public enemy, acts of
terrorism and sabotage; or other 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, availability of alternate supplies, or similar reason will not be grounds for
relief under this section. In the event the performance of a party is prevented under this section,
the performance of both parties will be excused until the performance is no longer prevented. The
parties will reasonably cooperate to seek a restoration of the performance, however, neither party
is obliged to expend resources to restore, repair, or replace facilities or services of the other party
the damage or interruption of which is the cause of the prevention of performance. This section
does not apply to circumstances within the scope of relief under section 6 of this contract.
28. Execution and Effective Date
This contract is effective as of the last date of execution by the parties as shown below:
Water Authority
By: ___ -=---f--J.r-~~~~-
Maureen A. Staple
APPROVED AS TO FORM:
syGvxuon~, ~<Wj
General C sel
Carlsbad Municipal Water District
By: ________ _
Matt Hall, President
12
Date: 3 -{ ~ -{ G,
Date:-----------
ATTEST:
By: ________ _
Barbara Engleson, Secretary
APPROVED AS TO FORM:
By: ________ _
Celia A. Brewer, General Counsel
13
EXHffiiT A
Basis and Method for Carlsbad Desalination Project Costs
Plant Costs [Section 8, paragraph {a)(l)(A)]
WP A Article 17.4 Capital Charges
(Debt Service Charge+ Equity Retum Charge)
WP A Article 17.5 Operating Charge
(Fixed Operating Charge+ Variable Operating Charge)
WPA Article 17.6 Electricity Charge
(Fixed Electricity Charge+ Variable Electricity Charge)
WPA Article 8.14 Poseidon Management Fee
(Annual Management Fee)
Pipeline Costs [Section 8, paragraph (a)(l)(B)]
WPA Article 9.11 Pipeline Debt Payment
(Annual Contracted Shortfall Payment WPA Appendix 10 Table 1.3)
Pipeline Operation and Maintenance
(Approved Water Authority Operating budget attributable to Desalinated Water
Conveyance Pipeline maintenance)
Capital Oversight Costs [Section 8, paragraph (a)(l)(C)]
Amortized capital cost of Water Authority construction management and design review
related to WPA Article 7 Appendix 3, 4 and 5 and the Pipeline Design Build Agreement
divided by 48,000 acre feet. (Annual cost spread over total WPA minimum annual
commitment Article 9.4 (a).)
Administrative Charge [Section 8, paragraph (c)]
Total cost attributable to WP A administration and member agency purchase contract
administration according to the approved Water Authority budget, divided by 48,000 acre feet.
14
EXHffiiTB
Calculation of Aqueduct Cost Transportation Charge Adjustment
[Section 8, paragraph (a)(2)]
Credit for Payment of WPA Article 9.11 Debt Payment:
(Annual Desalinated Conveyance Pipeline Debt Service
Divided by Projected Total Member Agency Deliveries)
Credit for Payment of Water Authority Capital Oversight
(Annual amortized cost divided by Total Member Agency
Deliveries)
Credit for Payment of Pipeline Maintenance Charge
(Annual O&M Budget attributed to Desalinated Water
Conveyance Pipeline Divided by Total Member Agency
Deliveries)
Cost for Chemical Injection to Boost Chloramines Residual
(Annual operating cost divided by 56,000 Acre Feet maximum
annual desalinated water production)
NOTES
($/AF)
($/AF)
($/AF)
$/AF
I "Projected Total Member Agency Deliveries" means the total deliveries of Water
Authority water to all Water Authority member agencies, except deliveries to member
agencies through direct connections to MWD owned pipelines.
2 Amounts shown in parenthesis ($/ AF) are credits against the Transportation Charge
Amounts shown without parenthesis are additions to the Transportation Charge
15
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RESOLUTION NO. 1548 ------
A RESOLUTION OF THE BOARD OF DIRECTORS OF CARLSBAD
MUNICIPAL WATER DISTRICT AUTHORIZING EXECUTION OF THE
FIRST AMENDMENT TO THE REIMBURSEMENT AGREEMENT
BETWEEN THE CARLSBAD MUNICIPAL WATER DISTRICT AND THE
SAN DIEGO COUNTY WATER AUTHORITY FOR THE PLANNING AND
DESIGN OF THE CARLSBAD 5 FLOW CONTROL FACILITY (PROJECT
5038} AND PRESSURE REDUCING VALVE.
EXHIBIT 2
WHEREAS, in May 2014, Carlsbad Municipal Water District (CMWD) entered into a
Reimbursement Agreement with the San Diego County Water Authority (SDCWA) for the
Carlsbad 5 Flow Control Facility titled "Reimbursement Agreement between the Carlsbad
Municipal Water District and the San Diego County Water Authority for the Carlsbad 5 Service
Connection Facility Planning Study;" and
WHEREAS, in order to complete the design of the Carlsbad 5 Flow Control Facility,
SDCWA desires to execute the First Amendment to the Reimbursement Agreement between
the Carlsbad Municipal Water District and the San Diego County Water Authority for the
planning and design of the Carlsbad 5 Flow Control Facility and pressure reducing valve
(Reimbursement Agreement Amendment); and
WHEREAS, staff estimates the planning and design work, environmental, and land
acquisition will cost approximately $1,014,300 of the estimated $2.8 million project; and
WHEREAS, staff anticipates returning to the Board in 12 to 18 months for consideration
of another Amendment to the Reimbursement Agreement necessary to authorize construction
of the Carlsbad 5 Flow Control Facility.
NOW, THEREFORE, BE IT RESOLVED by the CMWD Board of Directors of the City of
Carlsbad, California, as follows that:
1. That the above recitations are true and correct and incorporated herein.
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2. That the CMWD President is authorized and directed to execute the Reimbursement
Agreement Amendment attached hereto as Attachment A.
3. That the Administrative Services Director is authorized to appropriate $1,014,300 from
the Water Connection Fee Fund for the Carlsbad 5 Flow Control Facility and Pressure Reducing
Valve project (Project No. 5038).
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PASSED, APPROVED AND ADOPTED at a Special Meeting of the Carlsbad Municipal
Water District Board of the City of Carlsbad on the 12th day of April, 2016, by the following vote,
to wit:
AYES: Board Members Hall, Wood, Schumacher, Blackburn, Packard.
NOES: None.
ABSENT: None.
ATTEST:
First Amendment to Agreement
The Reimbursement Agreement Between the Carlsbad Municipal Water District and the San
Diego County Water Authority for the Carlsbad 5 Service Connection Facility Planning Study,
which was executed on May 12,2014 (Agreement), is amended effective ~H.NV B ~dOL~ ,
2016.
Purpose of Amendment:
Carlsbad has requested an addition to the scope of work, namely that the design of the Carlsbad 5
Flow Control Facility and Pressure Reducing Valve (Project) be added to the original scope of
work. This amendment addresses the addition to the scope of work and the increased
reimbursement for the work.
The Agreement is amended as follows:
1. Revise the title of the Agreement to add design and revise the facility name as follows:
Reimbursement Agreement between the Carlsbad Municipal Water District and the San
Diego County Water Authority for the Planning and Design of the Carlsbad 5 Flow Control
Facility and Pressure Reducing Valve
2. Section I, Description of Partnering Agencies, is amended to change the name of the
agreement pursuant to which desalinated water will be sold to the District and bought from the
Water Authority from "Member Agency Purchase Contract" to "Uniform Contract Between the
San Diego County Water Authority and City of Carlsbad for the Purchase of Treated Water
from the Carlsbad Desalination Project."
3. Section IV, Cost Reimbursement is amended as follows:
1. Paragraph A:
The District shall reimburse the Water Authority for its actual cost to complete the work
described in Attachment A -Scope of Work and within this Agreement. The estimated cost
for the planning study and the design of the Project, including all environmental permitting
and property acquisition, is approximately $1,014,300. If the construction of the Project is
delayed for an extensive period of time, the final design may need to be updated to meet
current codes and requirements. The District will pay the costs to modify the final design.
11. Add Paragraphs C, D, and E, as follows:
C. If District desires the Water Authority to terminate work at any time during design,
District will reimburse the Water Authority for all costs incurred through the date of
notification.
D. Deposit Schedule: Estimated costs for planning and design of the Project are shown in
Exhibit C-1. District will deposit with the Water Authority $1 ,014,300 within thirty (30)
calendar days of the execution of this Agreement.
1
P:\K0307-Carlsbad 5 SC\000-General Finance\002-Agreements\Carlsbad 5 FCF\First Amendment-Carlsbad 5 FCF-Final.docx
E. Project Cost Accounting: The Project cost accounting will be performed by the Water
Authority at the following milestones:
1. Phase 1: Completion of the Planning Study, Final Design, Environmental Review
and Property Acquisition for the Project.
2. Upon completion of Phase I, the Water Authority will provide an accounting report
to District detailing the costs.
2.1 If District's share of actual costs is more than the deposits, District will,
within thirty (30) calendar days of its receipt of an invoice representing the
results of the cost accounting, make full payment to the Water Authority of
all undisputed amounts. Any payment not made will be subject to a
delinquency charge of two (2) percent of the delinquent payment for each
month, or portion thereof, after said thirty (30) calendar days that the
payment remains delinquent; provided that disputed amounts shall not be
considered due until District and the Water Authority agree on the amount
actually due. If the delinquency does not exceed five (5) business days, the
charge shall be equal to one ( 1) percent of the delinquent amount; or
2.2 If the District's share of actual costs is less than deposits, the excess amount,
without interest, will be refunded by the Water Authority to the District
within 40 calendar days of the Water Authority providing final accounting to
the District.
3. Water Authority will retain detailed records from which costs are calculated for a
period of three (3) years from the date of the final invoice, and will be available for
verification by District. If District determines an audit is necessary, it will be
completed at District's expense during the three (3) year period. If any adjustments
are recommended by the audit, payment shall be made to the party, in accordance
with such recommendations. Payment shall be made within thirty (30) calendar days
of receipt an invoice resulting from the audit.
4. Amend Section V, Roles and Responsibilities of the Parties
1. Paragraph A is amended as follows:
A. Water Authority agrees to provide all labor and services necessary to complete the
planning study and design as described in Attachment A-Scope of Work and as
described below.
11. Add Paragraphs C and D as follows:
C. District will perform the following:
1. Review and provide written comments on plans, specifications, studies, reports, and
other documents provided by the Water Authority for the Project within twenty (20)
2
P:\K0307-Carlsbad 5 SC\000-General Finance\002-Agreements\Carlsbad 5 FCF\First Amendment-Carlsbad 5 FCF-Final.docx
working days of receipt. District's review shall not be unreasonably delayed or
withheld. If the District does not respond within the time stated herein, it will be
understood by the Parties that no District comment is forthcoming and the Water
Authority will proceed.
2. Assign a Project Manager to the Project to be the Water Authority's single point of
contact during planning and design of the Project.
D. The Water Authority will perform the following:
1. Provide all labor and services necessary to complete the planning study and design of
the Project.
2. Carlsbad 5 Flow Control Facility will be designed to Water Authority's standards
and the Pressure Reducing Valve will be designed to the District's standards.
3. Assign a Project Manager to be the District's single point of contact during the
planning and design of the Project.
4. Provide ten ( 1 0) calendar days' notice of meetings and other project related
occurrences.
5. Develop Request for Proposals, Notice of Inviting Bids, and select contractors to
provide the planning study, preliminary design, and final design services for the
Project.
6. Water Authority is the lead agency for the preparation and finalization the
environmental document(s) required by the Project.
7. Provide to the District, for review and comment, two (2) hard copies and one (1)
electronic copy of the design report, construction drawings and specifications, and
construction cost estimates.
8. Acquire any temporary construction easements and all other fee property for the
Project prior to the completion of design.
9. For the outlet piping, a buried monolithic insulating joint with butt straps will be
designed on the property line at the easterly limits of the Water Authority property
for change in ownership.
5. Add the following new Section VI, Facilities and Access Right of Way as follows and
renumber the consecutive sections.
VI. Facilities and Access Right of Way
A. The Carlsbad 5 Flow Control Facility will be located on property on the north side of
Lionshead A venue just west of Business Park Way in the City of Carlsbad as shown on
Exhibits A-1 and B-1 attached hereto and made a part of this Agreement. This property is
3
P:\K0307-Carlsbad 5 SC\000-General Finance\002-Agreements\Carlsbad 5 FCF\First Amendment-Carlsbad 5 FCF-Final.docx
currently privately owned. The Water Authority will purchase the property in fee, pursuant
to the terms of this Agreement. Facility access will be from adjacent public streets. The
Water Authority will retain ownership of the property.
B. The Pressure Reducing Valve will be located on property immediately adjacent to the
Carlsbad 5 Flow Control Facility as shown on Exhibits A-1 and B-1. This property is
currently privately owned but will be purchased in fee by the Water Authority, pursuant to
the terms of this Agreement and quitclaimed to the District upon completion of the Project.
The District will then own the property in fee. Facility access will be from adjacent public
streets.
C. Any landscaping required by the District outside of the Water Authority's property line of
the Carlsbad 5 Flow Control Facility shall be installed, owned and maintained by the
District. All landscaping shall be approved by the Water Authority and shall not impact the
integrity, security, operation, and maintenance of the Carlsbad 5 Flow Control Facility.
6. Delete Paragraph VII, Term in its entirety and revise the numbering of the consecutive sections.
7. Amend Section IX, Notice as follows:
1. Notice is amended to revise the Parties for the Water Authority and the District as follows:
With a copy to:
San Diego County Water Authority
4677 Overland A venue
San Diego, CA 92123
Attention: Director of Engineering
Carlsbad Municipal Water District
1635 Faraday Avenue
Carlsbad, CA 92008
Attention: Director of Engineering
City of Carlsbad
Carlsbad Municipal Water District
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Attention: General Counsel
All other terms, covenants, and conditions of the Agreement, as amended, shall remain in
full force and effect and shall be applicable to this First Amendment.
4
P:\K0307-Carlsbad 5 SC\000-General Finance\002-Agreements\Carlsbad 5 FCF\First Amendment-Carlsbad 5 FCF-Final.docx
IN WITNESS WHEREOF, the parties have executed the First Amendment to Agreement as
of the date written above.
San Diego County Water Authority
Approved as to form:
Rosann Gallien
Bepaty Oenetal Couftsd
~-----By: ____ ~---------------------
Hat tam
Counsel
5
Carlsbad Municipal Water District
By:
Attest:
Matt Hall
President
By.~~
Secretary
Approved as to form:
Heather L. Stroud
Deputy General Counsel
P:\K0307-Carlsbad 5 SC\000-General Finance\002-Agreements\Carlsbad 5 FCF\First Amendment-Carlsbad 5 FCF-Final.docx
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Environmental
Land Acquisition
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ESTIMATED PROJECT COSTS
Estimated Total for Planning and Design:
8
P:\K0307-Carlsbad 5 SC\000-General Finance\002-Agreements\Carlsbad 5 FCF\First Amendment-Carlsbad 5 FCF-Final.docx
Cost
$161,300
$450,000
$205,000
$198,000
$1,014,300
NOT TO SCALE
NAME:
LOCATION MAP
DESALINATED WATER
FLOW CONTROL FACILITY AND
PRESSURE REDUCING STATION
PLOTTED BY: SCOTT EVANS PLOT DATE:B/27/15 PATH:D: \UTILITIES DEPARTMENT\DESIGN 0/V/S/ON\SAMI\DESAL SERVICE.DWG
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NUMBER
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EXHIBIT
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EXHIBIT 4
December 28, 2015
Wendy Chambers
General Manager
Carlsbad Municipal Water District
5950 El Camino Real
Carlsbad, CA 92008
c;,y RE: Notice of fiscal year 2016 Unit Prices for Delivery of Local Water from the
Carlsbad Desalination Project
Dear Wendy,
In anticipation of Carlsbad's execution of, and in compliance with the Uniform Contract
for Member Agency Purchase of treated water from the San Diego County Water
Authority-Carlsbad Desalination Project" (Uniform Contract), I am sending you this
letter coinciding with the startup of Commercial Operations. Under the Uniform
Contract, Carlsbad will purchase its annual Contract Quantity of 2,500 acre-feet from the
Water Authority for the 30-year term of the agreement. Carlsbad's Contract Quantity is
part of the Water Authority's Minimum Annual Demand Commitment under the
Poseidon-Water Authority Water Purchase Agreement (Poseidon WPA). As provided in
Section 8 Subsection 2 (h) of the proposed Uniform Contract, the Water Authority will
provide written notice to Carlsbad of the:
"actual unit price for the Contract Year of the Commercial Operation Date as
soon as reasonably feasible after the Water Authority determines the prices in
accordance with paragraphs (a) and (c) of this section. At the time of the written
notice, the Water Authority will provide the Member Agency with a written
description of the basis of the determination, including budget data and
information. "
The following remaining conditions under the Poseidon Water Purchase Agreement
(WPA) and the proposed Uniform Contract have been satisfied and allow for notification
to Carlsbad of an Initial Contract Year Price:
A
• approval of the Water Authority's fiscal year 2016 operating budget
• publication of the San Diego CPI for the first six months of 2015
e identification of the commercial operations date
• finalization by the Water Authority and Poseidon of the Annual Demand
Commitment for the initial contract year
water to the San
Wendy Chambers
December 28, 2015
Page 2
Carlsbad Contract Quantity and Delivery Schedule
Under the Poseidon WPA, a Contract Year begins July 1 and ends June 30. Since the
Commercial Operations Date has been established as December 23, 2015 at 1200 hours
the Initial Contract Year will result in a reduction in the Water Authority's Minimum
Annual Demand Commitment for the period from the date of Commercial Operations
through June 30, 2016. The Water Authority's Minimum Annual Demand Commitment
for the Initial Contract Year is 24,983.6 acre-feet. Based on Section 6(b) of the proposed
Uniform Contract, Carlsbad's Contract Quantity for the Initial Contract Year is 1,250
acre-feet.
6(b) Purchase and delivery of the Contract Quantity will commence on the first day
of the calendar month following Commercial Operation of the Carlsbad
Desalination Plant pursuant to the Poseidon WPA. For the first Contract Year
of Commercial Operation the Contract Quantity will be one-twelfth of the
Contract Quantity times the number of full months following Commercial
Operation remaining in the Contract Year
Under the proposed Uniform Contract Section 6 (a), Carlsbad's Contract Quantity is
delivered in 12 equal monthly amounts. For the upcoming partial Initial Contract Year
consistent with the Uniform Contract, one-sixth of Carlsbad's Initial Contract Year
Contract Quantity of 1,250 acre-feet will be delivered monthly from January 2016
through June 2016. The schedule of monthly deliveries to the Water Authority and
Carlsbad's share of these deliveries is provided below in Table 1.
Table 1
Delivery Water Authority Carlsbad Deliveries Month Monthly Minimum (AF)
Dec-15 841.3 N/A
Jan-16 3,068.3 208.3
Feb-16 2,534.7 208.3
Mar-16 4,151.5 208.3
Apr-16 4,648.8 208.3
May-16 4,949.5 208.3
Jun-16 4,789.5 208.3
Total 24,983.6 1,250.0
Price & Payment for Contract Quantity
Section 8 of the proposed Uniform Contract provides the detailed terms and conditions
related to the price to Carlsbad for local water from the Carlsbad Desalination Project.
The following is a breakdown of the unit prices of desalinated water purchased from the
Water Authority as local supply. The cost to Carlsbad includes production and
conveyance from the Carlsbad Desalination Plant to Carlsbad 5 Flow Control Facility
Wendy Chambers
December 28, 2015
Page 3
(FCF). Credits and costs related to the Water Authority's Transportation Charge are also
included in the event Carlsbad is unable to take delivery at Carlsbad 5 and desalinated
water is conveyed through the Water Authority's Aqueduct system to a Carlsbad FCF. As
required under the proposed Uniform Contract, administration charges are included for
costs related to the Poseidon WPA and the Uniform Contract. Unit prices are organized
as they are described in Exhibits A and B of the proposed Uniform Contract.
Plant Cost'i [Section 8, paragraph (a) (1) (A)]
Reference Charge $/AF
WP A Article 17.4 Capital (Debt Service Charge+ $552.44 + $342.86 =
Charges Equity Return Charge) $895.30
WP A Article 17.5 Operating (Fixed Operating Charge+ $426.64 + $110.43 =
Charge Variable Operating Charge) $537.07
WPA Article 17.6 (Fixed Electricity Charge + $ 112.16 + $546.07 =
Electricity Charge Variable Electricity Charge) $658.23 1
WP A Article 8.14 Poseidon (Annual Management Fee) $10.52
Management Fee
Total Plant Related Unit Cost $2,101.12 .. ElectriCity Charge provided IS an estimated weighted average based on proJeCtions for water productiOn,
time of use, seawater influent salinity and temperature. (CEC FY2016 Water Unit Price Projection-
ll/30/2015) Actual monthly charges will vary with actual conditions and will comply with Appendix 9 of
the Poseidon WP A.
Pipeline Costs [Section 8, paragraph (a) (1) (B)]
Reference Charge $/AF
WPA Article 9.11 (Annual Contracted Shortfall Payment $209.64
Pipeline Debt Payment WPA Appendix 10 Table 1.3)
Pipeline Operation and (Approved Water Authority Operating $4.38
Maintenance budget attributable to Desalinated
Water Conveyance Pipeline
maintenance)
Total Conveyance Unit Price $214.02
Total WPA Unit Price $2,315.14
Wendy Chambers
December 28, 2015
Page4
Capital Oversight Costs [Section 8, paragraph (a) (1) (C)]
Reference Charge
WP A Article 7 Appendix Budget for K0302
3, 4 and 5 Amortized capital cost of
Water Authority
Expenditures divided by
48,000 acre-feet
Water Authority Budget for K0303
construction management Amortized capital cost of
and design review per divided by 48,000 acre-feet
Pipeline Design Build
Agreement
Total Capital Oversight
Costs
Administrative Charge [Section 8, paragraph (c)]
Approved Water Authority Total cost attributable to
2016 Operating Budget WPA and member agency
purchase contract
administration divided by
48,000 acre-feet
Total Unit Cost
$/AF
$5.61
$15.06
$20.67
$9.10
$2,344.91
Should Carlsbad decide to take delivery of desalinated water through the existing
Aqueduct System, rather than a new connection to the Desalinated Water Conveyance
Pipeline, the following is a breakdown of credits to the Water Authority's Transportation
Charge that Carlsbad would receive due to the payments you will be making related to
the full cost recovery purchase of desalinated water from the Water Authority.
Credit $/AF $/AF
FY 2016 FY 2017
Credit for Payment of WP A Article 9.11 Debt Payment: ($17.19) ($21.40)
Credit for Payment of Water Authority Capital Oversight ($1.34) ($1.35)
Credit for Payment of PiQ_eline Maintenance Charge ($0.44) ($0.46)
Total Transportation Charge Credit ($18.97) ($23.21)
Desalinated water deliveries through the existing Aqueduct system are subject to an
additional charge for chemical injection costs. This charge reflects the unit cost of
maintaining an adequate chloramine residual through the Water Authority's distribution
system and delivery to a member agency turnout.
Wendy Chambers
December 28, 2015
Page 5
! Charge
I Cost for Chemical Injection to Boost
I Chloramines Residual
I Net Transportation Charge Credit
Monthly Billing for Desalinated Water
FY 2016 Cost FY 2017 Cost
$2.95/AF $2.95/AF
($16.02) ($20.26)
As described in the Uniform Contract Section 8 (i), the Water Authority will bill
Carlsbad monthly for local supply from the Carlsbad Desalination Project. The charges
and, if appropriate, credits will appear on the Water Authority's Monthly Water Bill to
Carlsbad along with all other rates and charges for delivery of Water Authority supplies.
Because the Water Authority will be conducting a detailed reconciliation of its monthly
invoice for desalinated water deliveries by Poseidon, charges for that month will appear
on Carlsbad's Water Bill on the following month. For example, January deliveries of
desalinated water to Carlsbad will appear on Carlsbad's February Monthly Water Bill
from the Water Authority along with other charges for February Water Authority
deliveries. This delay in billing is necessary to ensure accuracy of Poseidon's billing to
the Water Authority and compliance with the Poseidon WP A.
Attachment A provides a summary of the charges described in this letter. Please review
the schedule of deliveries, unit prices, and credit information provided. We recognize that
Carlsbad has not signed the Uniform Contract. If you or your staff have any questions or
would like to meet with Water Authority staff regarding the Uniform Contract or for a
more detailed explanation of the information provided in this letter, please call me at
(858) 522-6741 and we can schedule a meeting to discuss.
Robert R. Yama , P.E.
Director of Water Resources
cc: Jeremy Crutchfield, SDCW A
Lisa Celaya, SDCW A
Rod Greek SDCW A
Tim Bombardier, SDCW A
Stu Williams, SDCW A
Attachment A
Summary of Initial Contract Year Carlsbad Desalination Project Charges
Under the Uniform Contract
Poseidon Water Water Authority Water Total Water
WPA Authority Desalinated Authority WP A Authority
Related Capital Water Administration Charges
Charges Costs Conveyance Charge
Recovery Pipeline
Charge Maintenance
Charge
$2,310.76/AF $20.67/AF $4.38/AF $9.10/AF $2,344.91/ AF
Initial Contract Year Water Authority Transportation Charges
Under the Uniform Contract
Transp. Net Credit Net Water
Charge For Authority
CY 2016 Charges Transp.
Paid under Charge
Uniform FY2016
Contract
FY 2016
$105/AF ($16.02/ AF) $88.97/AF
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EXHIBIT 5
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"
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between the San Diego County Water Authority and Poseidon Resources (Channelside) LP
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dated as of __________ , 2012 ("Poseidon WPA"); and
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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
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and made available for delivery according to the terms of that agreement, as well as additional 13
product water; and 14
15 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
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17 water in an amount up to a total of 49 percent of the desalinated water purchased by the SDCWA
18 under the Poseidon WPA; and
19 WHEREAS, the SDCWA has provided the Carlsbad Municipal Water District (CMWD)
20 with the proposed Poseidon WPA; and
21 WHEREAS, the SDCWA has provided the Carlsbad Municipal Water District with a
22 uniform contract pursuant to the guiding principles.
23 NOW, THEREFORE, BE IT RESOLVED by the Carlsbad Municipal Water District
24 Board of the City of Carlsbad, California, as follows:
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2.
That the above recitations are true and correct.
The Carlsbad Municipal Water District Board supports the approval of the
27 Carlsbad Desalination Project Water Purchase Agreement.
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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
M~
ATIEST:
~~ LOR~ M. D Sec ry
EXHIBIT 6
Reimbursement Agreement between the Carlsbad Municipal Water
District and the San Diego County Water Authority for the
Carlsbad 5 Service Connection Facility Planning Study
MA::f
This Agreement is made this ~day of~ 2014, by and between the Carlsbad Municipal Water
District (District) and the San Diego County Water Authority (Water Authority) regarding payment by the
District to the Water Authority for cost of services to prepare a facility planning study defining project
requirements for the Carlsbad 5 Service Connection that will be used to deliver product water from
Carlsbad Desalination Project directly to the District.
I. Description of Partnering Agencies
A. Under this Agreement, District is defined as the Water 'Authority member agency providing
retail water service to the City of Carlsbad and the recipient of product water from the Carlsbad
Desalination Project delivered in accordance with a future Member Agency Purchase Contract.
B. Under this Agreement, Water Authority is defined as the entity providing product water from
the Carlsbad Desalination Project to the District in accordance with a future Member Agency
Purchase Contract, the owner and operator of the facilities required to deliver such product
water, and the lead agency for preparation of the facility planning study described herein.
II. Purpose for Agreement
District agrees to pay for the services performed by the Water Authority to prepare a Facility Planning
Study for the future Carlsbad 5 Service Connection. Water Authority agrees to perform the services
described in Attachment A-Scope of Work.
Ill. Recitals
A. On September 13, 2011 the City of Carlsbad, District, and Water Authority executed the
"Agreement Memorializing Certain Understandings and Establishing a Framework for
Cooperation Regarding a Desalination Project Located in the City of Carlsbad" (Framework
Agreement). Among other terms, the Framework Agreement obligated the Water Authority to
construct a tee and blind flange connection to the Carlsbad Desalination Project Product Water
Conveyance Pipeline for the purposes of serving a future service connection.
B. On November 27, 2012, the District approved a resolution of intent to purchase 2,500 acre-feet
annually of desalinated product water from the Water Authority. The purchase price and other
terms for the delivery of desalinated product water to the District will be pursuant to a future
Member Agency Purchase Contract between the District and the Water Authority.
Reimbursement Agreement between the Carlsbad Municipal Water
District and the San Diego County Water Authority for the
Carlsbad 5 Service Connection Facility Planning Study
C. On October 28, 2013, the District and Water Authority executed the "Letter Agreement for the
Reimbursement of Costs by the Carlsbad Municipal Water District to the San Diego County
Water Authority for Design and Construction for a New Turnout to the Carlsbad Desalination
Project Product Water Conveyance Pipeline" (Letter Agreement). This Letter Agreement
memorializes District's request to relocate the new turnout and defines the terms for District to
reimburse the Water Authority for costs to construct additional facilities beyond the obligations
of the Water Authority as defined in the Framework Agreement. The facilities to be
constructed under the Letter Agreement shall be collectively referred to herein as the Carlsbad
Desalination Turnout Structure.
D. The District has requested the Water Authority prepare a facility planning study to define the
project requirements to meter and control flow from the Carlsbad Desalination Turnout
Structure up to and including the future Carlsbad 5 Service Connection. These project
requirements generally include new piping, isolation and control valving, metering,
instrumentation and controls, structures to house all mechanical and electrical equipment,
property acquisition needs, site access, environmental assessment and permitting.
E. The scope of this Agreement covers the Planning Study. The term of the Agreement concludes
with acceptance of the final Planning Study by the District and Water Authority. Any future
design and construction as a result of the final Planning Study will be addressed under a new
agreement between the District and Water Authority.
The Recitals are incorporated herein and the parties agree as follows:
IV. Cost Reimbursement
A. The District shall reimburse the Water Authority for its actual cost of services to complete the
work described in Attachment A-Scope of Work. The estimated cost to perform these services
is an amount not to exceed $95,000. The District shall, within thirty (30) calendar days of
receipt of an invoice for work performed, pay this amount to the Water Authority.
B. If at any time the Water Authority anticipates that its actual cost will exceed the estimated cost,
the Water Authority shall notify the District in writing. This written notification shall include a
new cost estimate and the basis for the cost increase. Within thirty (30) calendar days of receipt
of a request for additional funds, the parties will prepare a written amendment indicating the
new cost estimate. No other compensation for the services provided by the Water Authority
will be allowed, except for items covered by subsequent amendments to this Agreement. Any
amounts not paid within thirty (30) calendar days of receipt of invoice for work performed shall
be considered delinquent, and the Water Authority, at its sole discretion, may stop work.
Reimbursement Agreement between the Carlsbad Municipal Water
District and the San Diego County Water Authority for the
Carlsbad 5 Service Connection Facility Planning Study
V. Roles and Responsibilities
A. Water Authority agrees to provide all labor and services necessary to complete the Planning
Study as described in Attachment A-Scope of Work.
B. At its own cost and discretion, District agrees to participate in project team meetings,
participate in consultant selection by Water Authority and provide deliverable reviews during
execution of the Planning Study. Water Authority will provide notice of meetings, consultant
selection, and other related events to District. Deliverable reviews shall be within a reasonable
timeframe as established by the parties.
VI. Indemnification
District will defend, indemnify, and hold harmless the Water Authority, its officers, agents and
employees from and against any and all claims, demands, liability for any damages, costs (including
reasonable attorneys' fees) and expenses arising out of the Water Authority's performance under this
Agreement. The District's duty to defend, indemnify, and hold harmless shall not include any claims or
liabilities arising out of the active negligence, sole negligence, or willful misconduct of the Water
Authority, its officers, agents or employees.
VII. Term
The Agreement is effective when signed by the last party and shall terminate on December 31, 2015.
The Agreement may be extended by written agreement executed by both parties.
VIII. Early Termination
Either party may terminate this agreement by giving the other party 30 days written notice. All services
provided by the Water Authority up to the date of notice of termination shall be paid for by District.
IX. Notice
Any notice, payment, credit or instrument required or permitted to be given hereunder will be deemed
received upon personal delivery or 24 hours after deposit in any United States mail depository, first class
postage prepaid, and addressed to the party for whom intended as follows:
Reimbursement Agreement between the Carlsbad Municipal Water
District and the San Diego County Water Authority for the
Carlsbad 5 Service Connection Facility Planning Study
If to the WATER AUTHORITY:
If to DISTRICT:
San Diego County Water Authority
4677 Overland Avenue
San Diego, CA 92123
Attn: Steve Simon
Carlsbad Municipal Water District
1635 Faraday Avenue
Carlsbad, CA 92008
Attn: David Ahles
Either party may change such address by notice given to the other party as provided herein.
X. AMENDMENTS
The Agreement may be amended by written agreement executed by both parties.
XI. ASSIGNMENT
Neither party shall assign, sublet or transfer this Agreement or any rights under or interest in this
Agreement without written consent of the other party.
XII. SEVERABILITY
The partial or total invalidity of one or more parts of this Agreement will not affect the intent or validity
of this Agreement.
XIII. GOVERNING LAW
This Agreement shall be deemed a contract under the laws of the State of California and any action
regarding this Agreement shall be brought in federal or state court in San Diego County.
Reimbursement Agreement between the Carlsbad Municipal Water
District and the San Diego County Water Authority for the
Carlsbad 5 Service Connection Facility Planning Study
XIV. SIGNATURES
The individuals executing this Agreement represent and warrant that they have the legal capacity and
authority to do so on behalf of their respective legal entities.
IN WITNESS WHEREOF, the parties have executed this Agreement as of MAilk-1 10 '*' .
Carlslbad Municipal Water District
By:_..:.~-~:::.:::..-:::....""".,------
Approved as to form:
By,A&U at
Ronald Kemp, Assistant General Counsel
San !Diego County Water Authority
General Manager
Approved as to form:
sv,Ckv!l.Nl-~,Vep~
Daniel S. Hents e, General Counsel
Reimbursement Agreement between the Carlsbad Municipal Water
District and the San Diego County Water Authority for the
Carlsbad 5 Service Connection Facility Planning Study
ATIACHMENT A-SCOPE OF WORK
The Carlsbad 5 Service Connection Facility Planning Study {Planning Study) consists of the
analysis of the design, environmental compliance and permitting, land acquisition and
construction requirements to implement new facilities to deliver product water from the
Carlsbad Desalination Conveyance Pipeline Turnout Structure {Turnout Structure) to the future
Carlsbad 5 Service Connection {CR 5).
In general, the work to be completed under this Scope of Work consists of:
• Identifying design and operational requirements
• Siting of the flow control facility
• Evaluating pipeline alignment from the Turnout Structure to the service connection
• Identifying right of way acquisition needs
• Preparing an assessment of geotechnical concerns related to open trench construction
of pipeline and construction of new flow control facility structure
• Preparing conceptual plan and profile drawings of connection to the Turnout Structure,
pipeline alignment, and flow control facility
• Preparing opinions of total project costs and schedule estimates for project
implementation
The project location is shown in Exhibit A.
The results and conclusions of the Planning Study shall be provided in a Final Report. The
Planning Study will be used to support the CEQA process; however, the services to be provided
in this Scope of Work do not extend beyond preparation of the Final Report.
1.1 FIELD RECONNAISSANCE, DATA COLLECTION, AND UTILITY SEARCH
1.1.1 Perform a site visit to become familiar with the proposed project area
specifically looking to identify any apparent features that may impact the
design, access, and constructability of the project.
1.1.2 Review the most current detailed design drawings for the Carlsbad Desalination
Project Product Water Conveyance Pipeline.
Reimbursement Agreement between the Carlsbad Municipal Water
District and the San Diego County Water Authority for the
Carlsbad 5 Service Connection Facility Planning Study
1.1.3 District shall provide and Water Authority will review existing aerial surveying
and mapping data to develop topography for preliminary drawings and
hydraulic analysis.
1.1.4 Collect utility maps and easement information regarding .abandoned, existing,
and proposed utilities within the project area. Review utility maps to determine
potential conflicts with proposed alignments. Coordinate utility search and
conflict resolutions with the appropriate agencies. Identify locations of utilities
having a critical relationship to the project.
1.1.5 Identify jurisdictional boundaries, property ownership, and easements of public
agencies and utilities within the project area.
1.1.6 Based on aerial survey data and site reconnaissance, identify areas with distinct
topographic features or existing natural features that could affect permitting or
constructability ofthe proposed facilities.
1.2 DESIGN AND OPERATIONAL REQUIREMENTS
1.2.1 Review terms of the Board-Adopted Uniform Member Agency Purchase
Contract as it relates to delivery requirements for District's annual purchase of
water. Develop minimum and maximum flow range for CR 5 operation that
meets the anticipated terms of the final Member Agency Purchase Contract and
Water Authority and District operational needs.
1.2.2 Based on flow ranges determined from task 1.2.1 and the expected differential
pressure through the project facilities, develop recommend sizing, type, and
material for pipe, valves, meters, and other appurtenant equipment.
1.2.3 Develop operations and maintenance access needs to the facility and
serviceable equipment.
1.2.4 Identify remote monitoring and controiQeeds for all mechanical equipment.
1.3 PLANNING-LEVEL ASSESSMENTS
1.3.1 CR 5 Facility Configuration: Based on design and operational needs determined
from task 1.2, develop a schematic representation of the mechanical equipment
requirements for CR 5.
1.3.2 CR 5 Preliminary Design: Develop facility layout incorporating all mechanical
equipment requirements. Facility must also incorporate adequate maintenance
Reimbursement Agreement between the Carlsbad Municipal Water
District and the San Diego County Water Authority for the
Carlsbad 5 Service Connection Facility Planning Study
access to perform routine servicing and equipment removal and replacement
consistent with Water Authority standards.
1.3.3 Right of Way Evaluation and Acquisition: Identify temporary and permanent
easement and fee acquisitions required for construction and ongoing operation
and maintenance for pipeline and flow control facility, including access roads for
construction and maintenance. Public and private entities such as counties,
cities, utilities, land owners, and developers in the project area. These entities
shall be contacted to identify existing and planned land uses, compatibility of
publicly owned lands with project use, areas under development or proposed
for development, and any restrictions on land use.
1.3.4 Geotechnical Investigation: Through historical records search and non-invasive
site reconnaissance, identify any critical surface or subsurface information that
could impact design and construction costs.
1.3.5 Environmental and Permitting Issues: Assess potential biological, cultural
resources, and community related impacts associated with the construction and
operation of the proposed project.
1.4 CONCEPTUAL DESIGN
1.4.1 Preparation of Plan and Profile Drawings: Based on the findings of previous
tasks, prepare a scaled set of preliminary plan and profile drawings for the
pipeline and flow control facility
1.4.2 Hydraulic Analysis: Prepare a steady state hydraulic analysis under minimum
and maximum flow range to confirm adequate sizing of all piping and
mechanical equipment. Identify requirements and criteria for drain and fill
operations. Analyze and recommend areas where air and vacuum valves are
required.
1.4.3 Surge Analysis: Identify possible transient conditions and any surge control
facilities or equipment required to mitigate the transient condition.
1.5 COST ESTIMATES AND IMPLEMENTATION SCHEDULES
1.5.1 Preliminary Cost Estimate: Prepare preliminary construction cost opinion.
Provide documentation to support the basis for costs, exclusions, allowances,
contingencies, assumptions, and any other relevant cost items.
The cost estimates shall be prepared following the Association for the
Advancement of Cost Engineering International (AACEI) Recommended Practices
Reimbursement Agreement between the Carlsbad Municipal Water
District and the San Diego County Water Authority for the
Carlsbad 5 Service Connection Facility Planning Study
No. 17R, Cost Estimate Classification System -As Applied in Engineering,
Procurement, and Construction for the Process Industry. The cost estimate sha II be
prepared at the Class 4 estimate level. The pertinent sections of the Water
Authority's Draft Cost Estimating Guidelines, which follows the AACEI guidelines,
shall be provided to contractor.
1.5.2 Prepare a project implementation schedule incorporating time estimates for
environmental compliance and permitting, detailed engineering, construction and
start-up.
1.6 FINAL REPORT
1.6.1 Develop a draft, draft final, and final report summarizing the findings of all tasks
presented in this scope. Submit each report for project team and review and
provide all necessary revisions following project team review.
Reimbursement Agreement between the Carlsbad Municipal Water
District and the San Diego County Water Authority for the
Carlsbad S Service Connection Facifity Planning Study
EXHIBIT A-PROJECT lOCATION
* ProJect
Lotatlon
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