HomeMy WebLinkAbout2012-11-13; Municipal Water District; MinutesMINUTES
SPECIAL MEETING: MUNICIPAL WATER DISTSRICT BOARD SPECIAL MEETING
DATE: NOVEMBER 13,2012
TIME: 11:00 AM
PLACE: CITY ADMINISTRATION BUILDING, ROOM 173A> 1635 FARADAY
President Hall called the meeting to order on November 13, 2012 at 11:30 a.m. Present: Hall, Kulchin,
Packard, Blackburn and Douglas.
REQUESTS TO SPEAK ON LISTED ITEM:
None.
2. UPDATE REGARDING COUNTY WATER AUTHORITY PURCHASE AGREEMENT WITH POSEIDON
RESOURCES.
The following document was distributed for this item and is on file in the Office ofthe City Clerk:
• Desalination Overview and Update PowerPoint Presentation
Ken Weinberg, Director of Water Resources for the San Diego County Water Authority, gave the update
on the status ofthe Carlsbad Desalination Project, including project components (plant, conveyance
pipeline, connection to Water Authority aqueduct, and improvements to Twin Oaks plant), and the
parties Involved in the project construction and operation (contained In presentation referenced above).
Mr. Weinberg also reviewed the challenges to ensuring reliable sources of water for the San Diego
region, and explained the current water sources. He explained the contents of the proposed Water
Purchase Agreement, which would allow Poseidon to permit, design, construct, own and operate the
desalination plant through the 30-year agreement (WPA). He also noted that the Draft Agreement had
been released for review to member agencies on August 22,2012, and contains 26 sections and 18
technical appendices. Mr. Weinberg explained that the contracts for each agency are uniform except
for quantity, and will allow member agencies to purchase local supply directly from the Water
Authority.
Mr. Weinberg described the responsibilities ofthe parties as follows:
• Poseidon - Permit, Design and Build the Desal Plant and Conveyance Pipeline; Operate and
Maintain the Plant; and Supply Desalinated Water
• Water Authority - Take or Pay for water if it meets specifications (48,000 acre feet per year
minimum); Construct improvements to Twin Oaks Plant; Provide ability to receive desalinated
water; and Operate and Maintain Conveyance Pipeline, Twin Oaks Plant improvements; and
Pipeline 3.
Page 1
He reviewed the project risks that would be transferred to Poseidon (construction, operation,
maintenance and repair) and those that would be retained by the Water Authority (changes in law, cost
of Encina improvement, bond financing interest rates, general price inflation, and electricity rates) He
also outlined the termination and purchase options contained in the agreement, and the projected costs
of the project to both Poseidon and the Authority.
Mr. Weinberg also explained the estimated price increase per customer (7-10%) that would apply upon
operation ofthe plant and reviewed the benefits that would be provided bythe construction and
operation ofthe desalination plant.
In response to inquiry from Mayor Hall regarding the possibility of smaller cities joining together to
purchase desalinated water, Mr. Weinberg stated that would not be possible.
In response to inquiry from Mayor Pro-Tem Kulchin regarding potential construction risks due to labor
relations, Peter MacLaggan of Poseidon Resources stated that Poseidon is responsible for this as part of
the construction, and has an agreement with the San Diego Building 8i Construction Trades Council for
provision of labor for the project.
Council Member Douglas commented regarding the energy related risks, but added that continuing to
rely on the Metropolitan Water District for provision of water contains risks also due to regulations and
future water shortages.
Gordon Hess, of Gordon Hess & Associates, continued with the presentation. He explained the potential
impacts to water rates and described the assumptions made to determine the impact to water rates if
Carlsbad participates directly in the project.
Mr. Hess reviewed the historical water rate trends and average rate increases from 1980 to the present.
He also presented a summary of the preliminary forecast of future rate increases for water purchased
from the Metropolitan Water District and for the purchase of desalinated water.
In response to inquiry from Council Member Packard regarding risk to cost recovery relative to the
plant, Mr. Hess explained that future electricity prices and possible cost overruns could affect future
savings. He also explained that the water taken directly from the conveyance pipeline would not be
subject to wheeling charges.
Finance Director Chuck McBride continued with the presentation, providing additional details regarding
the Local Supply Option, which would involve a commitment to guarantee a reliable local water supply
for a thirty year period. He also described potential mandatory cutbacks from the Metropolitan Water
District, based on conditions such as drought and insufficient supply due to restrictions on their other
water supplies.
Page 2
Mr. McBride reviewed the cost/benefit of purchasing desalinated water, noting the initial cost of
desalinated water would be higher, but would gradually be less than water supplied by Metropolitan
Water District over the life of the contract.
In response to inquiry from Council Member Blackburn regarding costs of water per acre foot, Mr.
Weinberg stated that the 2013 cost per acre foot will be $1259 plus $70 (RTS).
In response to inquiry from Mayor Hall, Mr. Hess stated that the analysis did not include a review of
possible increases in reclaimed water.
In response to inquiry from Council Member Packard regarding other local water sources. Acting Utilities
Director Chambers stated those would include groundwater, conservation, and other possible supplies
to supplement the district's needs.
In response to inquiry from Mayor Pro-Tem Kulchin, Ms. Chambers noted that the City of Oceanside has
decided not to participate in the Agreement to purchase desalinated water.
In response to inquiry from Council Member Douglas, Mr. McBride noted that there were several ways
to address the initial 20% rate increase in the first year, such as smoothing the rates and using reserves
to mitigate the increase.
Staff noted that the Water Purchase Agreement (WPA) will be brought to the Board for consideration on
November 27,2012. It was also noted that the matter will be on the agenda for the meeting of the San
Diego County Water Authority (SDCWA) for their meeting on November 29,2012.
PUBLIC COMMENT:
None.
ADJOURNMENT OF CARLSBAD MUNICIPAL WATER DISTRICT BOARD SPECIAL MEETING TO THE
CONTINUATION OF THE CITY COUNCIL WORKSHOP.
By proper motion, the Special Meeting ofthe CMWD Board of Directors was adjourned to the
continuation ofthe City Council Workshop at 1:25 p.m.
Assistant Secretary
Page 3
11/13/2012
Desalination Overview &
Update
November 13, 2012
CARLSBAD
Agenda
Desal as a Regional Supply
Desal as a Local Supply
Impact on Carlsbad Ratepayers
Calendar
CARLSBAD
San Diego County
Water Authority
Ken Weinberg
11/13/2012
^ CARLSBAD
• Carlsbad Desalination Project
Ken Weinberg, Director of Water Resources
San Diego County Water Authority
Carlsbad Municipal Water District 4
Board of Directors Workshop
November 13,2012
11/13/2012
Challenges to Ensuring Supply Reliability
forthe San Diego Region
High reliance on single source of
imported supply
• State Water Project and Colorado
River
• Uncertainties regarding reliability
Recurring droughts
Limited storage reserves on SWP
Regulatory restrictions on SWP
deliveries
Future water demand increases
Potential effects of climate change
San Diego County's Diverse Water
Supply Portfolio
103 TAF 44TAF
(13%) (6%)
190 TAF
(24%)
56 TAF
(7%)
27 TAF
(4%)
48 TAF
(6%)
Total = 779 TAF
11/13/2012
Project Components
• 50 MGD desalination plant located on the site ofthe
Encina Power Station (Poseidon)
• 10 mile 54-inch diameter conveyance pipeline (Poseidon)
• Connection to Water Authority aqueduct Pipeline 3
(Poseidon)
• Relining of 5.5 mile reach of Pipeline 3 (Water Authority)
" Improvements at the TOVWTP to accommodate
desalinated water flows (Water Authority)
11/13/2012
• Water Authority
« Project Company: Poseidon
• Plant EPC Contractor: Kiewit-Shea Joint Venture
• Process Engineering and Equipment: IDE
« Operating Services Provider: IDE
South Bay Water Reclamation Advanced Water Treatment Plant.
Plant, California Fountain Valley, CA Ashkelon (83 mgd)
Proposed Water Purchase Agreement
Poseidon will permit, design, construct, own and
operate the desalination plant through a 30-year
Water Purchase Agreement (WPA)
WPA released on September 27
• 26 articles (sections)
• 18 technical appendices
11/13/2012
Draft Member Agency Water
Purchase Contract
Released for member agency review on August 22
Provide member agencies opportunity to purchase local
supply directly from Water Authority
Draft contract based on June 2011 Board principles
Uniform contracts, except for quantity
Full cost recovery
Assumption of same risk profile as Water Authority
Total agency purchases limited to maximum 49% of annual supply
Classified as treated local water supply
Purchases reduce amount of project costs that need to be
recovered through Water Authority rates and charges
Balancing Price and Risk
Pursuing an Appropriate Risk/Reward Tradeoff
Why a Water Purchase Agreement?
Project Risks Assume<l bv the Water Authority
RiSk>,i4
A?sinrii?c! by
Financial Feasibility of the Proiect
Financincr
Not High
FiiiiC^cecible Cox-o'-Fundj
Range of
Acceptable
Outcomes
Higher Unacceptabe
Risks Risk Level
Low ;;ost-of-Funds
11/13/2012
Poseidon Responsibilities
Permit, Design and Build the Desal Plant (WPA)
Permit, Design and Build the Conveyance
Pipeline (Design-Build Agreement)
Operate and Maintain the Desal Plant
Supply Product Water
Water Authority Responsibilities
• "Take or Pay" for Product Water if it meets
specifications (minimum of 48,000 AF/Year)
• Timely Construction of TOVWTP
Improvements and Pipeline 3 Rehabilitation
» Physically be able to receive Product Water
» Operate and Maintain the Conveyance Pipeline,
the TOVWTP Improvements and Pipeline 3
11/13/2012
Risks Transferred
« Construction and Operating Cost Overruns
* Timely Project Completion
" Regulatory and Law Compliance
• Regulated or Differing Site Conditions
« Capital Maintenance, Repair and Replacement
• LaborSupply and Relations
Risks Retained by Water Authority
• Changes in Law that affect all water treatnnent plant
operators or wastewater dischargers
• Cost of Encina Improvements Due to Expected Power
Station Closure, Up to $20 Million Capital and $2.5
Million Annual Operating Costs (a change in law)
» Uninsurable Force Majeure Events
• Unusual Raw Seawater Water Parameters (no additional
compensation)
• Retained risks are "uncontrollable circumstances"
11/13/2012
Risks Retained by Water Authority
(continued)
• Bond Financing Interest Rates
• General Price Inflation
• General Electricity Rates
Projected Electricity Price
Carlsbad Desal Project
Mid Scenario
" .1.2% 25
High Scenario
„ 1.2%
g 10 „,.-*^.-'«**^'*"""' f 1
20
S 15
g 10
3 4% .——^-7?^=**"'" 2012 2014 2016 2018 2020 2022 2024 ^ 2026 g 2028 2030 2032 2034 2036 2038 2040 2042 2044 2012 2014 2016 2018 2020 2022 2024 2026 g 2028 2030 2032 2034 2036 2038 2040 2042 2044 Non-Levelized Price •- leveliied Price Non-Levelized Price Leuelized Price
Future Electricity Price - Key Drivers
Factors driving higher growth rate Factors driving lower growth rate
• Renewable Portfolio Standard (RPS)
• AB32
• Fleet replacement
• Natural Gas Prices
• Demand-Side Response
• Rate-Setting Process
11/13/2012
Impact on Water Unit Price -
Comparison
Base Case vs. High (Levelized)
5.500
5.000
4,500
4,000
S 3,500
3,000
2,500
2,000
1,500
Watei Unll PI Intreaie:
$127/AF
LT: I
fM I
Mid Scenario (Levelized) High Scenario (Levelized)
Base Case vs. High (Non-Levelized)
5,500
5,000
4,500
4,000
^ 3,500
3,000
2,500
2,000
1,500
Unit Price
518J/AF
Mid Scenario (levelized) High Scenario (Non-Levelized)
Security for Contract Performance
« Equity Investment: $164 Million
• Project Financing: Non-Performance Risk
Incentivizes Bondholders to Cure Breaches
« Letter of Credit to Secure Performance
* Letter of Credit to Assure Financing
10
11/13/2012
Performance Guarantees
Product Water Quality Guarantee
• Compliance with all federal and state drinking water
regulations
• Additional standards for certain water quality parameters
Minimum Product Water Delivery Guarantee
• Annual supply to meetWater Authority demands (between
48,000 and 56,000 acre-feet)
Water Ordering Rights
• Water Authority rights to adjust delivery orders to reflect
seasonal and daily demand changes
Termination & Purchase Options
• Purchase options at Water Authority sole discretion
• Convenience Termination
• Early buy-out provision
• End of Term
• $1 end of 30-year term
• Event of Default
11
11/13/2012
Cost ofthe Carlsbad Desalination
Project
• Plant and Pipeline Capital Cost: $691 Million
• Financing Costs: $213 Million
• Method of Finance for Plant and Pipeline:
" 82% funded through Bonds issued by the California
Pollution Control Financing Authority
• 18% Cash Equity from Stonepeak Infrastructure
Bond Financing
$740 Million
Equity Contribution
$164 Million
COST DRIVERS
The Electricity Charge is
driven by:
• Terms of Poseidon's O&M
Agreement with IDE
SDG&E Rates
• Water Authority's option to
select supplier
The Electricity Charge will vary
with electricity prices
The Operating Charge is
driven by:
• Terms of Poseidon's O&M
Agreement with IDE
• Other operating expenses
The Operating Charge is
indexed to CPI
Electricity
Charge
Operating
Charge
Capital
Charge
The Capital Charge is
driven by:
• Po<.efdon's Capital
B'jck\et
• Bond Issuance
• Negotiated Equity
Return/Developer Fee
The Capital Charge is fixed
at a pre-established
escalation rate
12
11/13/2012
UNIT PRICE MATRIX
Debt
Service
Charge
Equity
Return
Charge
Fixed
O&M
Charge
Variable
O&M
Charge
Fixed Variable
Electricity Electricity
Charge Charge
Mgmnt
Fee/
Operator
Incentive
Minimum Annual
Commitment
(48TAF/Yr)
X X X X X X X
Additional Water
between 48TAF-56
TAF
X X X
Excess Water Beyond
56,000 X X X
Unexcused Demand
Shortfall Units X X X X
Excused Supply or
Demand Shortfall
Units
No Payment. Right to make up in the future
Unexcused Supply
Shortfall Units No Payment. Right to make up during Contract Year
Interest Rates and Assumptions
Debt Service charge is a direct pass through
No Poseidon mark-up
Interest rate benefit/risk assigned to Water Authority
Current Market Interest rates for iow investment grade infrastructure
Plant Bonds: 5.1% (Private Activity Bonds subject to AMT)(PABs)
Pipeline Bonds: 4.6% (Municipal Purpose Bonds exempt from AMT)
Final interest rate wil! not be known until financial closing
Staff established 100 BP buffer from expected market rate
Water Unit Price analyzed at mid point 5.6% and maximum of 6.1% for the Plant
Bond final maturity
Will seek Board Authorization to price Bonds at maximum of 6.1% for the Plant Bond
final maturity
13
11/13/2012
Interest Rates and Assumptions
6.10% Bond Rate 5.60% Bond Rate
First Year $21,042,800^ $18,955,933^
Debt Service
Annual Water
Deliveries
48,000
AF/year
56,000
AF/year
48,000 r-. ^r.r. .n/
56,000 AF/year
AF/year
Debt Service
Charge (2016$/AF) $658 $564 $592 $508
Debt Service
Charge (2012$/AF) $612 $525 $551 $472
^ First year debt service and water deliveries pro-rated to reflect partial first contract year
Escalation Rates and Assumptions
Unit Price Component WPA Contractual Provision Staff Modeling Assumption
Fixed Charges:
A fixed annual "slope" of 2.5%
1. Debt Service Charge has been used to establish this 2.5% Fixed Slope 1. Debt Service Charge
charge
A fixed annual "slope" of 2.5%
1- Equity Return Charge has been used to establish this 2.5% Fixed Slope
charge
A fixed annual "slope" of 2.5%
3- Pipeline Installment Payments has been used to establish this 2.5% Fixed Slope
charge
Fixed Operating Charge Indexed to San Diego CPI Assumed to escalate at 2.5%
5- Fixed Electricity Charge Linked to SDG&E Rates Assumed to escalate at 2.0%
Variable Charges:
6. Variable Operating Charge Indexed to San Diego CPI Assumed to escalate at 2.5%
7- Variable Electricity Charge Linked to SDG&E Rates Assumed to escalate at 2.0%
8. Poseidon Management Fee Indexed to San Diego CPI Assumed to escalate at 2.5%
14
11/13/2012
Cost ofthe Carlsbad Desalination
Project
Operating and Maintenance Costs:
• Total O&M Costs: $48.8-$53.1 million annually
• Costs reflect a range of 48,000 AFY-56,oooAFY
Unit Cost (Plant + Pipeline):
48,000 acre feet per year 56,000 acre feet per year
$2,097/AF $i,876/AF
Water Authority Costs to implement the
Carlsbad Desalination Project
• Pipeline 3 and Twin Oaks Valley WTP improvements;
Twin Oaks additional operating costs; construction
oversight:
• Total Cost = $80 million
48,000 acre feet per year
$i79/AF
56,000 acre feet per year
$i53/AF
Administrative Costs during operation:
48,000 acre feet per year 56,000 acre feet per year
$i4/AF $i2/AF
15
11/13/2012
Total Cost ofthe Carlsbad
Desalination Project
Total Capital Cost:
• Plant and Pipeline Cost: $691 Million
• Financing Costs: $213 Million
• Water Authority improvements $80 Million
and construction oversight
$984 million
Total Unit Cost ^:
48,000 acre feet per year 56,000 acre feet per year
$2,290/AF $2,04i/AF
includes debt service, operations, WA construction oversight and administrative
costs 3^
Estimated Retail Impact ofCarlsbad
Desalination if Applied to CY 2013 Rates
Estimated rate impact as Water Authority supplies:
Based on high range ofCarlsbad seawater desalination costs
Based on conservative 2013 sales of 466,000 AF
First year of operation sales (2016) projected at 520,000 AF
5 Retail Agency Average Composite Cost (CY 2012)
Fixed Charge $19.83 + Commodity Charge $51.40 = Composite Monthly Bill:
$71.23
Estimated Rate Impact
Monthly Retail Cost
2013
Percent Retail
Impact
$5 - $7 7% -10%
Actual rate impact will vary by member agency
1. Analysis based on retail rates for the City of Carlsbad, Helix Water District, the City of San Diego, Sweetwater Authority, and Otay Water District.
2. Tier 1 and Tier 2 pricing blocks vary by member agency.
3. Historic total water demand used to calculate member agency specific weighting factors.
4. Individual member agency commodity charge calculated using its average single family residential water use (hcf)-
5. Composite commodity charge is the sum of the individual member agency's commodity charge times Its weighting factor.
16
11/13/2012
Member Agency Purchase Contract
Updated - Proposed Unit Price Payments
Carlsbad Desalination Project Costs Aqueduct
Costs
Water Purchase Agreement
Payments
Product Water Pipeline
Design Build
Agreement
Twin Oaks
Valley WTP
Transportation
Charge
Fixed Variable Management
Unit Unit Fee/Incentive
Price Price Payment
DBA Dept Budgeted
Service O&M Costs
(Inefficiency due
to desalinated
production)
(Adjusted for
amounts paid under
Project Costs)
Contract Quantity XX X x x x X
Additional Deliveries X x X
Unexcused Demand
Shortfall Units x x x X
Excused Demand
Shortfall Units No Payment for Project Water
Unexcused or
Excused Supply
Shortfall Units
No Payment for Project Water
Contract also includes annual administrative fee payment 33
Cost Allocation Issues Under Discussion
Valuation of Treatment Benefit of Desalination
Board is considering alternative methodologies for valuing the water
treatment benefit of desalination
Valuation of Supply Benefit
Alternative methods proposed to value the supply cost of desalination
Consideration of a fixed charge to supplement melded
supply rate
Potential collection of a portion of supply revenue through a new fixed
charge
Allocation of costs determined in independent cost of
service study
Legal and equitable
17
11/13/2012
Remaining Tasks Leading To SDCWA
Board Consideration of WPA
Finalize Proposed WPA and Technical Appendices
Finalize construction and operating prices
Finalize Design Buiid Agreement for new pipeline
Finalize Bond and other financing documents
Board initiates cost of service study to incorporate into rate and
charge structure
Finalize agreement for Member Agency purchase as local supply
Hold two evening community meetings
Questions ?
18
11/13/2012
Gordon Hess & Assoc.
Gordon Hess
Determining Impact to Water Rates if Carlsbad
Participates Directly in Desalination Project
SDCWA members offered up to 49% of plant capacity
Additional capacity ( up to 8,000 AF) prorated among
SDCWA and participating agencies at "variable" cost (O&M
and variable power)
MA's pay prorated share of desalination plant, product
water pipeline and other costs
MA's share SDCWA risks and reliability benefits
Water considered a "local supply"
Water not subject to SDCWA Customer Service or Storage
Charge, or MWD RTS and Capacity Charges
Water subject to SDCWA wheeling charges, if existing
SDCWA system is used
19
11/13/2012
Transportation $93/AF Commodity
1 Supply S714/AF Commodity 1
Customer Service S26.4M proportioned among
MA's
3 year rolling average of
eligible deliveries
storage $60.2M proportioned among
MA's
3 year roiling average of
eligible deliveries
Treatment S256/Af Commodity
Infrastructure Access Charge
(lAC)
$2.64 per meter equivalent Equivalent meters
MWO Capacity Charge $6.8 M proportioned among
MA's
Rolling 5 year peak
calculation
MWD RTS Charge $35.9 M proportioned among
MA's
10 year rolling average of
eligible deliveries
Reliability Charge Proposed for 2015 Peak delivery during rolling
10-year period
other Charges Taxes, Standby Charges
(MWD and SDCWA)
AV and per parcel or acre j
charged to property owners j
20
11/13/2012
Determining Impact to Water Rates if Carlsbad
Participates Directly in Desalination Project
Assumptions:
• Urban Water Management Plan demands for MWD, SDCWA, and
SDCWA member agencies
• Existing water rate structure plus new reliability charge
• SDCWA provided desalination costs from Water Purchase Agreement
~ Fixed cost 2.5% annual adjustment
- Variable costs inflated by CPI
• SDCWA and MWD supply forecasted rates and trends (2 to 6 percent
per year)
- Adjusted for Bay Delta costs
- Adjusted for SDCWA PL relining costs (applies to wheeling)
~ Adjusted for desalination project rate impacts on SDCWA
(preliminary)
^ CARLSBAD
Determining Impact to Water Rates if Cai lsbad
Participates Directly in Desalination Project
.Ass u rn pT j c> il s, Co 111 i n Ll e d;
• Roll-down from rolling average charges (RTS, capacity charge, storage, customer
service, aiid reliability charge)
• lAC (meter charges) e,xclucled
• Carlsbad purchase of up to 5,000 AF of desalination plant supply
- Mici-raiH^e piec'i iCiry costs ^issutiieci
• T.O. inefficiencies and PL-3 improvements r^ielded into SDCWA rates
Other:
• Carlsbad takes all water directly from conveyance pipeline (no wheeling)
• Cost to connect to conveyance pipeline not included in water cost
• Risk costs assip,nod to SDCVAyA (i.e. bond costs, changed water quality stds) not
included; additional stress case includes added risks
• SDCWA has not yet made final decision on allocation of costs to rate strucrure
CARLSBAD
21
11/13/2012
Hisloiicdl Waier Rates Trends
i'i'i'aiic AiiDual Ti'cdici! IVdici' lUnv lucycus'.'s
1980 to 2013
1990 to 2013
2000 to 2013
2003 to 2013
6.24%
5.83%
5.33%
7.58%
*For MWD, rate increases
do not include RTS or
Capacity Charges
7.26%
6.78%
6.98%
9.44%
CARLSBAD
22
Summary of Assumptions Used in Analysis
Desalination Costs
11/13/2012
2016 2017-2020 2021-2025 2026-2035 2036-2045
Volume Demand Proposed Increment Increment Increment Increment
Demand AF 5,000 AF 357 AF 357 AF 700 AF 700
Increment Maximum AF 714
fixed Costs Proposed Increase Increase Increase Increase
Capital S/AF 606 0.00% 2.50% Z50% 2.50%
Financing $/AF 281 9.70% 2.50% Z50% 2.50%
fixed O&M $/AF 441 2.50K 2.50% Z50% 2.50%
Fixed Electricity S/AF 80 2.50% 2.50% 2.50% 2.50%
Subtotal $/AF 1,410 2.86% 2.50% 2.50% 2.50%
Variable Costs
Variable O&M S/AF 110 2.50% 2.50% 150% 2.50%
Variable Electricity S/AF 484 3.00% 3.00% 2.00% 118%
Subtotal S/AF 594 2.91% 2.91% 2.09% 1.42%
Other Costs
Conveyance S/AF 267 0.00% 2.50% Z50% 2.50%
Indirect Costs S/AF 20 150% 1.50% 150% 150%
T.O. Inefficiency S/AF 40 6.00% 6.00% aoo% aoo%
Wheeling S/AF -6.00% 5.00% 4.00% 4.00%
Subtotal $/AF 327 0.83% 2.87% 113% 2.13%
^ CARLSBAD
A'e.vt//r.s ol .'liuiiysi.s
'nit G isLo/ SD riivi Siinnlias I's. Dircc l Purcha .sc De.vc// St .ipplic.s
(extludas lAC)
Unit Cost Per Acre-Foot ($/AF)
S6.D00
SS.OOO
$4,000
S3,000
$2,000
-SDCWA
Desal.
Melded Cost- 5000AF
$1,000
^ CARLSBAD
23
11/13/2012
Questions ?
Finance Department
Chuck McBride
CARLSBAD
24
11/13/2012
Local Supply Option
One time decision to purchase
increased local agency
reliability for the next 30 years,
providing guaranteed local
supply during mandatory
cutbacks.
CARLSBAD
Example: 20% Mandatory Cutback
Annual delivery 20,000 AF(100%)
Target (No Local Supply) 16,000 AF (80%)
Target (5,000 AF Local Supply) 18,200 AF (91%)
CARLSBAD
25
11/13/2012
Local Supply
• Severe droughts every 10 years
• Metro Water supply sufficiency
• Regulatory restrictions on Delta and Colorado
River supplies
Cost-Benefit Model
• Cost of desal water much higher in the first
decade
• Benefit from later years overtakes these costs
over the life of the agreement
^ CARLSBAD
26
11/13/2012
k)St Comparison - current assui
27
11/13/2012
at. If flRSC LD if f O Hi if I
• Cost of local supply - current assumption
" NPV over 30 years:
• Cost of local supply - modified assumption
- NPV over 30 years: $15 to $32 million cost
^CARLSBAD " "-.^s
28
Questions ?
11/13/2012
^ CARLSBAD
Calendar
• November 13: CMWD Board Workshop
• November 27: CMWD Board Meeting
~ Express interest in purchasing local supply
• November 29: SDCWA Board Meeting
r
CARLSBAD
29
11/13/2012
30