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Public Benefit Ratio Review Summary: Los Vaqueros Reservoir Expansion Project Overview This Public Benefit Ratio (PBR) review is the first component of the California Water Commission’s (Commission’s) technical assessment of applications for Water Storage Investment Program (WSIP) funding. This review serves as official notification to the applicant, and begins the appeal process. The reviewer-adjusted PBR indicates the need for additional information or clarification, which the applicant may submit in an appeal following the process described in the Commission’s regulations section 6008(a)(2)1 (also described below). The applicant may appeal any adjustments described in this review.

The reviewer-adjusted PBR does not reflect a Commission decision on this project’s PBR; it is the result of the Commission’s technical review team’s assessment of the information provided in the application. The review team consists of Commission staff and consultants as well as agency staff from the California Department of Fish and Wildlife (CDFW), the California Department of Water Resources (DWR), and the State Water Resources Control Board (State Water Board). Commission staff ensured that reviews adhered to WSIP standards, as expressed in Proposition 1, Commission regulations, and the WSIP Technical Reference Document. Commission staff also coordinated independent agency reviews.

Applicants must submit their appeal to the Commission by 5:00 pm on February 23, 2018.

All appeals must:

• Include a written rebuttal that refers to the specific adjustments described in this PBR review; and

• Identify the PBR that the applicant believes to be correct or an alternative value or calculation with any new supporting information.

The Commission will not accept any revised or new information not directly related to the changes made by a reviewer, including changes to the project description and benefits claimed. The appeal may not exceed 20 pages in 12-point font (per regulations section 6008(a)(2)) and any referenced supporting information. The written rebuttal may refer to information that was submitted in the original application or additional information provided with the appeal. When citing information to support its rebuttal, the appeal should refer specifically to the location of the supporting information. All supporting information must be included with the appeal or in the application. If the applicant recalculates the PBR, the denominator must be the amount of funding requested in the application. Please refer to regulations section 6008 for complete details of what may be included in the appeal.

1 Unless otherwise noted, all references to “regulation” are to the California Code of Regulations, Title 23, Section 6000 et seq.

Public Benefit Ratio Review Summary

Los Vaqueros Reservoir Expansion Project Page 2 of 6

The applicant should consult the Technical Reference (TR) for additional information regarding the reviews conducted by CDFW, DWR, and the State Water Board (as applicable) regarding the requirements to substantiate the physical changes claimed in the application or questions regarding modeling. For questions related to calculating physical changes and water operations generally, see Chapter 4 of the TR. Specifically:

Section 4.2 General Project Analysis Section 4.3 Surface Water Operations Analysis Section 4.4 Groundwater Analysis Section 4.5 Riverine Hydrologic/Hydraulic Analysis Section 4.6 Delta Hydrodynamics/Hydraulic Analysis Section 4.7 Ecosystem Analysis Section 4.8 Water Quality Analysis Section 4.9 Flood Risk Reduction Analysis Section 4.10 Recreation Analysis Section 4.11 Emergency Response Analysis Section 4.12 Water Supply Analysis Section 4.13 Hydropower Analysis

Similarly, if reviewers have adjusted the monetization of public benefits, the applicant should consult the TR and sections 6000(a)(4)(F) and (G) of the regulations. The TR contains information about monetization methods in Chapter 5 and Appendices D-F. Descriptions of the three approaches to monetizing a benefit – avoided cost, alternative cost, and willingness to pay – are provided in section 5.3.1 of the TR.

The reviewers will evaluate each applicant’s appeal and prepare a response. The response may include new recommendations based on the information in the appeal. The reviewers’ response will include a recommended PBR for the Commission to consider at the May 1-3, 2018 Commission meeting.

Once the Commission has determined the PBR for each application, reviewers will prepare the initial application scores. Changes in the magnitude of physical public benefits or monetized value resulting from the Commission-determined PBRs will be incorporated, as applicable, into all review elements, and will be reflected in the initial application scores. Initial scores and staff comments will be released on May 25, 2018 for public review. The Commission will decide on application scores at the June 27-29, 2018 Commission meeting.

Summary Reviewers have evaluated the WSIP application submitted by the Contra Costa Water District (CCWD) for the Los Vaqueros Reservoir Expansion Project (LVE), and adjusted the applicant’s PBR, as shown in Table 1. This document and its attachments explain the reasons for the adjustments.



Table 1. Summary of Adjustments to Public Benefit Ratio

PBR Summary As Submitted As Adjusted

Total Public Benefit ($ millions)

$1,554.2 $199.5

Program Funding Request ($ millions)

$433.9

Public Benefit Ratio 3.60 0.46

Note: This table includes monetized benefits. Non-monetized benefits contained in the application were not evaluated to calculate the PBR but will be evaluated as part of the full technical review.

This review summary incorporates the reviews conducted by the Commission’s economics consultants and water operations consultants, DWR, and CDFW. The following four reviews are attached to this summary:

• California Water Commission, Economics Review for Public Benefits Ratio (Economics Review)

• California Water Commission, Water Operations Review for Public Benefits Ratio (Water Operations Review)

• California Department Fish and Wildlife, Los Vaqueros Reservoir Expansion Project Monetized Ecosystem Benefits (CDFW Review)

• California Department of Water Resources, Public Benefits Ratio Recommendations (DWR Review)

The water operations and economics evaluations were conducted by teams of subject matter experts. Each team implemented careful internal review and quality control. The reviewers used standard checklists and templates to verify assumptions and results. Teams met weekly for four months to discuss preliminary findings, assure consistency, and identify issues for further evaluation. Each individual reviewer’s findings were discussed by the broader review team and specifically double-checked by a designated senior reviewer.

Some team members were excluded from reviewing certain applications due to potential conflict of interest. In these cases, review and quality control were assigned to others.

Adjustments to the PBR may have resulted from one or more of the following: adjustments to the physical benefits, adjustments to the monetization of those benefits, or adjustments to costs or a cost allocation. The attached reviews describe the specific reasons for changes to the benefits and monetized values based on the reviewers’ evaluation of supporting models, data, analytical methods, and/or calculated results.

The applicant should note that more than one adjustment may have been made to the same benefit or monetized value.



Monetized Public Benefits Summary Table 2 shows the value of the benefits as submitted by the applicant and as adjusted by reviewers.

Table 2. Summary of Adjustments to Monetized Public Benefits

Public Benefits As Submitted ($ millions)

As Adjusted ($ millions)

Ecosystem $1,033.4 $0.0

Water Quality $0.0 $0.0

Flood Control $0.0 $0.0

Emergency Response $486.7 $199.5

Recreation $34.1 $0.0

Total Public Benefits $1,554.2 $199.5

Physical and Monetized Benefits Below are some overarching water operations issues identified in the application, which are further explained in the attached water operations review:

• The applicant made changes to CalSim II not directly related to the project. Reviewers cannot verify the effect of these changes on project benefits; and

• The applicant did not provide DSM2 analysis as required by WSIP regulations.

Table 3 summarizes reviewers’ adjustments to claimed physical benefits and/or the economic valuation of those benefits, and refers to the applicable attached review.



Table 3. Physical Benefits and Economic Issues

Benefit Physical Benefit Economics

Ecosystem – Reduced Salmonid Entrainment*

CDFW recommends removal from PBR calculation. See CDFW Review Page 1.

Value Reduced: • Unit values for adult fish applied to

some juveniles and escapement information not provided.

• The share of entrainment benefit that represents juvenile salmonids will not be counted. See Economics Review Page 4.

Ecosystem – Refuge Water Supply*

CDFW recommends removal from PBR calculation. See CDFW Review Page 1.

Value Reduced: • Did not accept applicant’s method for

projecting unit water value. • Adjusted using TR unit water values.

See Economics Review Page 3.

Emergency Response – Delta Outage

No adjustments to the physical benefit.

Value Reduced: • Applicant’s avoided water shortage cost

is not justified. • Adjusted using information from UWMP

and GW pumping cost. See Economics Review Pages 4-6.

Emergency Response – Drought Emergency

No adjustments to the physical benefit.

Value Reduced: • Did not accept applicant’s method for

projecting unit water value. • Adjusted for occurrence as specified in

TR, using TR unit water values. See Economics Review Page 6.

Recreation DWR recommends removal from PBR calculation: • Cannot verify assumptions

and model used to calculate visitation. See DWR Review Page 2.

Method accepted.

Note: This table includes monetized benefits. Non-monetized benefits contained in the application were not evaluated to calculate the PBR but will be evaluated later as part of the full technical review that will be released on May 25.



*The applicant should note that the ecosystem benefits for reduced salmonid entrainment and refuge water supply are the project’s measurable improvement to the Delta ecosystem or to a tributary to the Delta, which is required by Water Code section 79752. If the applicant does not address the removal of one or both of these benefits through the appeal, staff will recommend that the Commission make an eligibility determination at the May 1-3, 2018 meeting.

Eligible Program Funding Per regulations section 6007(b)(1)(B), Table 4 shows eligible WSIP funding based on all adjustments to benefits and costs. Other changes affecting capital costs eligible for WSIP funding (e.g., changes to cost estimates, cost allocation, and other related calculations) are described on page 8 of the Economics Review.

Table 4. Summary of Adjustments to Eligible Program Funding

Eligible Costs ($ millions)

As Submitted ($ millions)

As Adjusted ($ millions)

Capital Cost $867.8 $839.1

Program Funding Request $433.9

Adjusted Program Cost Share**

$0.0

**Water Code section 79756(b) requires that the value of ecosystem benefits must constitute at least 50 percent of WSIP program cost share. The removal of ecosystem benefits (as shown in Table 3) results in an adjusted program cost share of $0.

The applicant should address both the ecosystem physical benefit and monetization issues in its appeal to change the adjusted PBR and eligible funding amounts presented in this review.

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Economics Review for Public Benefits Ratio: Los Vaqueros Reservoir Expansion Project This technical review describes the public benefit ratio (PBR) results for the Los Vaqueros Reservoir Expansion project (LVE), and adjusts the physical and monetary benefits and cost analysis. Changes to physical benefits show how all reviewer adjustments — to physical benefits, monetized benefits, and costs — affect benefits, PBR, and eligible funding.

Adjusted PBR and Eligible Funding After review, the adjusted PBR is 0.46 and adjusted eligible Water Storage Investment Program (WSIP) funding is $0.0. Reviewer adjustments may be modified through the appeal process described in the review summary and in regulation section 6008(a).

Summary of Application and Reviewer Adjustments Table 1 summarizes the applicant’s cost and benefits analysis. The column titled “As Submitted” lists the applicant’s benefits, costs, and PBR. The applicant estimates present value of benefits (in 2015 dollars) at approximately $2,719 million, of which $1,554 million are public benefits eligible for funding and $1,033 million of the public benefits are ecosystem benefits. The present value of LVE project costs is $1,327 million, of which $868 million are capital costs eligible for WSIP funding. The applicant requests $434 million in WSIP funding. The PBR, which is the ratio of monetized public benefits to the amount of WSIP funding requested, is 3.6.

In Table 1, the columns titled “As Adjusted” summarize the results of all staff changes to physical benefits, monetized value of benefits, costs, and PBR. Economics reviewers concluded that $36.5 million in requested capital for re-operation of existing facilities, and $18 million in administrative costs and institutional costs for partner agencies are ineligible for WSIP funding. Economics reviewers concluded that about $839.10 million in capital costs are eligible for WSIP funding.

Economics reviewers adjusted monetized public benefits and the discounting of costs and benefits, for the reasons described below. The California Department of Fish and Wildlife (CDFW) reviewed the physical benefits and recommended that refuge water supply and reduced salmonid entrainment physical benefits are not supported by the analysis provided, and should be removed (see CDFW Review, attached). Economics reviewers also adjusted monetization of emergency response benefits. California Department of Water Resources (DWR) reviewers recommended removing all recreation benefits (see DWR Review, attached). Reasons for monetization adjustments are provided in the sections below. Reviewer adjustments may be modified through the appeal process described in the review summary and in regulation section 6008(a).

Based on the applicant’s requested funding of $434 million, the PBR after review adjustments is 0.46.

Economics Review


Table 1. Applicant-Submitted and Reviewer-Adjusted Benefits, Costs, and PBRa

As Submitted As Adjusted

Benefits Allocated

Capital Cost Summary Benefits Allocated

Capital Cost Summary

WSIP Eligible Capital $867.8 $839.1 Public Benefits

Ecosystem $1,033.4 $338.6 $0.0 $0.0 Water Quality $0.0 $0.0 $0.0 $0.0 Flood Control $0.0 $0.0 $0.0 $0.0 Emergency Response $486.7 $85.3 $199.5 $0.0 Recreation $34.1 $10.0 $0.0 $0.0

Total Public Benefit (TPB) $1,554.2 $433.9 $199.5 $0.0 Non-Public Benefits $1,164.5 $433.9 $546.4 $839.1 Total $2,718.7 $867.8 $745.9 $839.1

Total Cost $1,327.1 $1,452.3 Applicant Request $433.9 $433.9 PBR: TPB/Applicant Request 3.60 0.46 Adjusted Eligible Funding $0.0 Notes: aDollar values are shown in millions of 2015 dollars in present value. • Source for applicant-submitted summary benefits and costs is the file named “CCWD_Tab6_BenCalcMonetResil_6-6_QuantSupport-

LVE_Cost_Benefi.pdf.” • Values are rounded to the nearest tenth of a million dollars for display purposes. Underlying calculations reflect the precision provided

by the applicant, as will the final determinations of PBR and eligible funding.

Monetized Benefits This section documents reviewer adjustments to the applicant’s monetary and physical benefits. The following discussion about benefits monetization provides economics reviewers’ conclusions regarding monetization regardless of whether other reviewing agencies recommended removal of the physical benefits.

Ecosystem Benefits as Provided by the Applicant The applicant quantifies ecosystem benefits for reduced entrainment of salmonids and Level 4 refuge water supply. Reduced entrainment benefits for salmonids would be achieved by implementing physical improvements at the Rock Slough Fish Screen Facility and expanding an aquatic weed management program in Rock Slough.

For refuge water supplies, increased deliveries of Incremental Level 4 supplies would be provided to the Refuge Water Supply Program. Table 6-4.13 in the file named “CCWD_Tab6_BenCalcMonetResil_6-4_MonetBenAnalysis” provides unit water values by water year type, which include “water market prices, carriage losses, and conveyance costs.” Unit water values for years beyond 2045 are maintained at the 2045 level.

Economics Review


Benefits as Adjusted by Reviewers Physical Benefits CDFW considered the monetized ecosystem benefit for refuge water supply and monetized ecosystem benefit for reduced salmonid entrainment insufficiently supported by the information in the application (see CDFW Review, attached). Therefore, the physical benefits associated with refuge water supply and reduced salmonid entrainment were removed.

The discussion about benefits monetization below provides economics reviewers’ conclusions regarding monetization regardless of whether CDFW recommended removal of the physical benefits.

Monetization Economics reviewers adjusted the monetization of the refuge water supply physical benefit. Reviewers evaluated the water transfer pricing model and concluded it was unsuitable for predicting future refuge water supply benefits because:

• The water transfer pricing model generates future unit values that are primarily driven by a time trend variable.

• There is no explanation regarding the causes of that time trend, and whether those causes might continue in the future.

• The model does not capture the severity of the 2014 to 2016 droughts, and causes some of the price effects of the drought to be attributed to the general time trend.

• The model provides no information about the effects of the Sustainable Groundwater Management Act (SGMA).

• The applicant filters 6,000 spot-market transactions down to 678 transactions that are used to estimate the transfer pricing model’s statistical parameters, but provides no documentation to demonstrate that the remaining sample is unbiased.

• The applicant states that the water transfer pricing model is non-recursive, implying that price and quantity are simultaneously determined and therefore require two-stage least squares for statistically sound estimation. However, the model as described in the application is recursive. The price forecasts are derived from one equation, and the quantity of water transferred is not used to forecast price.

• The applicant does not demonstrate that the model specification is justified for the unit values estimated using the model.

Therefore, economics reviewers did not accept use of the water transfer pricing model for the purposes of WSIP.

In general, the alternative cost of refuge water supplies at the destination should include conveyance charges if LVE project costs also include conveyance charges. Economics reviewers were unable to determine whether refuge water conveyance costs were included in the LVE project cost estimates, and recommend quantifying benefits using the WSIP Technical Reference Document (TR)1 Delta export water supply unit values. If the physical benefit were not removed, the present value of the refuge water

1 Access the TR online at at https://cwc.ca.gov/Documents/2017/WSIP/TechnicalReference.pdf

Economics Review


supply benefit would be $490.0 million. If conveyance costs are included in LVE project costs, these costs may be added to the benefit. However, removal of the physical benefit results in zero monetary benefit.

Economics reviewers adjusted monetization of reduced salmonid entrainment physical benefits. Reduced salmonid entrainment benefits are partially based on reduced entrainment of juvenile fish. The TR unit values for salmonids should be applied to adult fish that escape to spawn. The TR states “The recommended values are assigned to the fish that return to reproduce and support the long-term existence of the species.” The applicant assumes that the saved fish would consist of 33 fall-run Chinook, two spring-run Chinook, and six steelhead trout annually.

The applicant has not provided age information for these fish. Data in the application indicate that entrained fall-run Chinook were adults. Without additional information regarding the age of spring-run chinook and steelhead trout, the benefit of reduced entrainment for these two species was removed. The present value of the adult fall run chinook salmon entrainment benefit would be $3.67 million. Nevertheless, removal of the physical benefit results in zero monetary benefit.

Water Quality No public water quality benefits are monetized.

Flood Control No public flood control benefits are monetized.

Emergency Response: Delta Outage Benefits as Provided by the Applicant The applicant indicates that Delta outage emergency water supply would equal 160 thousand acre-feet (TAF) under 2030 conditions and 156 TAF under 2070 conditions, and would be provided in 2 percent of years (per the file named “CCWD_Tab6_BenCalcMonetResil_6-6_QuantSupport-LVE_Cost_Benefi.xlsx”). The applicant uses the willingness-to-pay (WTP) approach, applying short-run price elasticity to a constant elasticity demand (CED) function calibrated to available water supply to estimate the value of emergency supplies for municipal and industrial (M&I) users. The applicant uses a price elasticity of -0.189, resulting in an average unit value of $3,744 per acre-foot (AF).

Benefits as Adjusted by Reviewers Physical Benefits DWR did not recommend any adjustments to the non-drought emergency - Delta outage physical benefit (see DWR Review, attached).

Monetization Economics reviewers adjusted the monetization of the non-drought emergency - Delta outage physical benefit. Delta outage benefits would be obtained by providing 160 TAF in 2030 or 156 TAF in 2070 in 2 percent of years. The emergency water supplies amount to 1.78 and 1.8 percent of all project water supplies in 2030 and 2070, respectively.

The applicant uses unit values from its demand function to monetize the value of Delta outage benefits provided by the LVE project. The TR requires that, if feasible alternatives exist to provide the same benefit, the least cost of those feasible alternatives must be provided, and the lesser of that value or the

Economics Review


WTP estimate must be used. Reviewers concluded that pumping groundwater or using other local supplies would result in a lower cost than the unit values from the applicant’s demand analysis, so the monetized value provided by the applicant overestimates the benefit. This is based on a review of the applicant’s Urban Water Management Plan (UWMP)2 and those of other beneficiaries of the emergency water supply. For example, on page 10-13 of its 2015 UWMP,3 Alameda County Water District states:

“Findings from the analysis show that, under the assumptions described above, the District would have sufficient supplies to provide full water deliveries to its customers for over 12 months, including the projected annual increase in water demand, before supply and production constraints limit further deliveries. The District’s estimates of its ability to withstand an extended outage of its SWP supplies is attributed to the projected availability of its local supplies (groundwater, desalination), emergency storage from Del Valle Reservoir in the Alameda Creek Watershed, and continued purchases of San Francisco Regional Water System supplies.”

Therefore, the response to a Delta outage is not simply to impose shortage on customers, but to replace at least a portion of the water with local supplies and with water provided by other districts.

On page 8-7 of the Santa Clara Valley Water District’s 2015 UWMP, 4 the district states:

“The analysis indicates that the impacts of a six-month Delta outage are largely operational as they would require retailers to supplement their treated water supplies with groundwater and for the District to actively manage the groundwater recharge program to meet countywide needs.”

Section 8-6 of the 2015 UWMP for Zone 75 indicates that it would be able to offset a catastrophic supply interruption in the winter, but would need to implement shortage requirements to customers in the summer.

Taken together, these sources suggest that the first 6 months of a Delta outage would be managed with existing local supplies. Economics reviewers concluded that an appropriate monetization would use the unit cost of local water supplies for the first 6 months of the shortage. The last 6 months of the outage would be managed by imposing mandatory shortages. Only during these latter months would the benefit of the LVE project’s emergency supply be monetized using the WTP method to avoid shortage.

Reviewers recalculated the alternative cost of Delta outage as follows:

• The LVE project would supply between 84,000 and 122,000 AF of emergency water supply in 2030 (depending on the specified alternative; see the file named “CCWD_Tab5_FeasImplRisk_5-1_FeasDocum-Att3-EconAnalysis.pdf”).

• Based on the information in the noted 2015 UWMPs, the applicant and the other beneficiaries of its emergency water supply can provide 73,228 AF of local supply during the first 6 months under 2030 conditions at $1,334 per AF (in 2015 dollars), less $250 per AF in avoided conveyance cost.

2 http://www.ccwater.com/DocumentCenter/Home/View/2216 3 http://www.acwd.org/DocumentCenter/View/1264 4 http://www.valleywater.org/Services/UWMP.aspx 5 http://zone7water.com/images/pdf_docs/water_supply/2-4-16_draft-uwmp-w-appdcs.pdf

Economics Review


• The remaining water supply lost due to Delta outage, which ranges from 10,772 to 48,772 AF depending on the alternative, would require customer shortage valued according to the WTP method.

In addition, reviewers concluded that the applicant’s CED demand function is incorrectly calculated and applied. Reviewers corrected the WTP benefits (i.e., avoided water shortage cost) calculation by integrating the TR CED demand function over the AF of emergency supply benefit, and dividing that by the reduction in quantity supplied under each alternative.

Reviewers averaged the local supply cost and the water shortage cost, resulting in a WTP of $1,540 per AF. Reviewers applied this unit value to the 160 TAF (for 2030) and 155 TAF emergency water supplies provided by the LVE project. Using this approach, reviewers calculated that the Delta outage benefit is $4.9 million per year in 2030 and $4.8 million per year in 2070. The adjusted present value of the non-drought emergency - Delta outage benefit is $139.13 million.

Emergency Response: Drought Emergency Benefits as Provided by the Applicant The applicant monetizes drought emergency benefits provided by the LVE project during a drought emergency. The applicant calculates unit values for drought emergency supplies using its water transfer pricing model; see the file named “CCWD_Tab6_BenCalcMonetResil_6-6_QuantSupport-LVE_Cost_Benefi.xlsx.” The applicant calculates the additional drought emergency water supply provided by the LVE project in the years from 1929 to 1934, from 1976 to 1977, and from 1989 to 1992, and applies unit values from its water transfer pricing model.

Benefits as Adjusted by Reviewers Physical Benefits DWR did not recommend any adjustments to the M&I drought emergency physical benefit (see DWR Review, attached).

Monetization Economics reviewers adjusted the monetization of the M&I drought emergency physical benefit. The TR provides that emergency drought benefits can be claimed for a critical year that is the third or later year in an extended drought. The applicant includes M&I drought emergency benefits for all critical years. Therefore, economics reviewers reduced the drought emergency benefits for critical years that were not the third year or later in an extended drought. In addition, reviewers evaluated the water transfer pricing model (see discussion under “Emergency Response: Delta Outage”) and concluded it was unsuitable for predicting future water supply benefits. Instead, the economics reviewers applied the TR critical year unit values. The adjusted present value of the M&I drought emergency benefit is $60.36 million.

Recreation Benefits as Provided by the Applicant The applicant quantifies recreation benefits associated with the greater lake surface area and facilities provided by the new storage facility, totaling $34.1 million in present value. The applicant uses the WSIP recreation visitation model for quantifying visitation.

Economics Review


Benefits as Adjusted by Reviewers Physical Benefits DWR recommended removal of the recreation physical benefit (see DWR Review, attached).

Monetization Economics reviewers made no adjustments to the monetization of recreation physical benefits. However, removal of the physical benefit results in zero monetary benefit. Economic reviewers noted that page F-14 in the TR, which discusses the WSIP recreation visitation model, states that “to be applicable, the proposed reservoir should include campsites and facilities to enable private boating” and “visitation at proposed reservoirs that are much different from those in the State Parks data set should be estimated using different methods.”

Non-Public Benefits Benefits as Provided by the Applicant The applicant quantifies non-public benefits for M&I water supply, M&I water quality, and agricultural water supply that total $1,164 million.

Benefits as Adjusted by Reviewers Physical Benefits Water operations reviewers did not recommend any adjustments to the water supply physical benefits (see Water Operations Review, attached).

Monetization The applicant monetizes non-public water supply benefits using a water transfer pricing model. Economics reviewers evaluated the water transfer pricing model and concluded it was unsuitable for predicting future water supply benefits for the reasons described in the section above titled “Ecosystem: Refuge Water Supply.” Therefore, economics reviewers did not accept use of the water transfer pricing model to monetize the non-public water supply benefit for the purposes of WSIP.

Unit values at the destination can include conveyance costs if such conveyance is included as part of LVE project cost, but the applicant does not appear to include conveyance costs in its project cost estimates. Therefore, reviewers used TR unit water values for adjusted water supply benefits, with no conveyance cost added. The adjusted present value of water supply benefits is $508.26 million.

Reviewers accepted the applicant’s M&I water quality benefits of $38.18 million.

Economics Review


Project Costs Costs as Provided by the Applicant Detailed costs are found in the file named “CCWD_Tab6_BenCalcMonetResil_6-9_TotalProjCostEst.” Capital costs consist of $794.8 million incurred for construction of LVE plus about $73 million in reallocated costs of existing facilities, for a total of $867.8 million.

Costs as Adjusted by Reviewers Reviewers conclude that $73 million of the capital cost for re-operation of existing facilities is not eligible for WSIP funding. Another $18 million of requested capital costs are administrative costs and institutional costs for partner agencies, and are ineligible for WSIP funding. The applicant also discounts capital costs back to the start of construction, and reviewers removed that discounting (see the section “Other Monetization Assumptions” below). After adjustments, the resulting eligible capital cost is $839.1 million. Reviewers also adjusted the discounting of O&M and other costs, although these adjustments did not affect the PBR.

Other Monetization Assumptions The applicant discounts costs and benefits back to the start of construction. Both the regulation and TR require discounting operations costs and benefits to the first year of project operations (see section 6.4 of the TR). Reviewers corrected this calculation, which results in an increase in the present value of a cost or benefit. Otherwise, reviewers concluded that the applicant has generally monetized costs, discounted costs and benefits, and conducted cost allocation consistently with TR requirements.

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Water Operations Review

for Public Benefits Ratio:

Los Vaqueros Reservoir Expansion Project

Applicant: Contra Costa Water District (CCWD)

Review of Water Operations Analysis Methodology

The Los Vaqueros Expansion (LVE) is a CALFED surface storage project and is required per

regulation Section 6004(a)(1) to use the CalSim II and DSM2 model products provided by

the Water Storage Investment Program (WSIP) to analyze effects on the State Water Project

(SWP)/Central Valley Project (CVP) system and on the Delta.

Based on the information included in the application, reviewers have identified the following

limitations of the applicant’s analysis.

CalSim II Modifications to the Without-Project Assumptions

Applicants are required to use the assumptions contained in the WSIP supplied models for

factors that are not specific to the proposed project. The WSIP Technical Reference

Document, in Section 4.3.9, states “Technical adjustments to the CalSim II model code shall

be limited to modifications needed to complete the description of the proposed project and

depiction of public and non-public benefits. Adjustments made to the without-project future

conditions must also be included in the with-project future conditions and must be justified as

requirements for the analysis of the proposed project. Regulatory requirements, agreements,

and operations criteria of the SWP and CVP in the CalSim II model code for the 2030

without-project and 2070 without-project future conditions shall not be modified.”

The applicant made numerous and substantial changes to the CalSim II model code relative

to the without-project model published by the WSIP. Some changes are needed to represent

current Los Vaqueros facilities and operation, and to evaluate the proposed LVE. Many of

the changes are not part of the Los Vaqueros facilities and operations, and would require

approvals and implementation by other agencies, including the following:

• Bypass SWP and CVP operations logic, and instead hold SWP and CVP allocations to

user-defined values.

• Modify Navigational Control Point flow requirement on the Sacramento River from the

National Marine Fisheries Service’s (NMFS’) reasonable and prudent alternative (RPA)

requirement to a user-defined scheme.

• Modify American River Flow Management Schedule (i.e., the flows released from Folsom

Lake).

• Add a CVP contractor demand in the American River Basin (i.e., Depletion Study

Area 70).

• Modify SWP and CVP San Luis Reservoir rule curve calculations (i.e., changes San Luis

operations).

W ATE R S TO R AG E I N V EST M E N T P R OG R AM PAGE 2 OF 2

• Implement a Fremont weir notch.

• Set flow in Clear Creek Tunnel (from Lewiston to Whiskeytown) to a user-defined

timeseries in each model cycle.

These non-LVE changes were also included in the with-project model. Reviewers cannot

determine the magnitude of the effects of these non-LVE changes on project benefits or

impacts.

DSM2 Analysis Not Provided

LVE is a CALFED surface storage project and is required per regulation Section 6004(a)(1)

to use the CalSim II and DSM2 model products provided by WSIP to analyze effects on the

SWP/CVP system and the Delta. The applicant does not provide a DSM2 analysis.

Water Operations Review Conclusions Related to Benefits

Refuge Water Supply

The application states that the LVE project will provide 46 thousand acre-feet (TAF) per year

under 2030 conditions and 42 TAF per year under 2070 conditions of Incremental Level 4

water. This is consistent with the CalSim II model results provided by the applicant.

Municipal and Industrial (M&I) Water Supply

The application states that there is a net M&I water supply benefit of 31 TAF per year under

2030 conditions and 30 TAF per year under 2070 conditions. This is consistent with the

CalSim II model results for total benefits.

Agricultural Water Supply

Changes in agricultural water supply presented in the application show a net benefit of 8 TAF

per year under both 2030 and 2070 conditions. However, reviewers are not able to identify

this amount within the CalSim II model results.

Water Quality for M&I Water Supply

The application states that there is a water quality benefit based on a reduction in chloride

concentration of 28 milligrams per liter (mg/L) under 2030 conditions and 26 mg/L under

2070 conditions for the City of Brentwood, and a reduction of chloride concentration of

3 mg/L under both 2030 and 2070 conditions for other CCWD water users (see the file

“CCWD_Tab6_BenCalcMonetResil_6-4_MonetBenAnalysis.pdf”). However, reviewers are

not able to identify this improvement for Brentwood within the CalSim II model results. No

CalSim II parameter specific to Brentwood can be located in the CalSim output file.

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