Southern California Agricultural Water Team

Southern California Agricultural Water Team

Agricultural Water SummitNovember 12, 2008

Escondido, CA

Overview

Introduction− Interim Ag Water Program Background

Water Supply Conditions− Storage Conditions/2009 Outlook

MWD IAWP Revisions− Phase Out− Opt-Out/Ag Conservation Program− SDCWA Special Ag Water Rate

Decision Support− MWD Shortage Allocation Plan− MWD Rate Projections

Questions

MWD Ag Water Sales History

MWD deliveries for agriculture started in 1958

1991 MWD and CAC develop a water rate that recognizes the difference in water rates based on supplemental water use

Plan allows growers a fixed rate reduction in exchange for recognition of their use of supplemental water and the ability to be interrupted ahead of M&I users

1994 saw the program gain permanency and the IAWP (Interim Agricultural Water Program) was born through the efforts of the CAC

Interim Ag Water Program History

MWD and its member agencies utilize the IAWP to increase water sales and sustain Agriculture in Southern California through the 1990’s and into the 21st century

2006 – Federal Court Judge Oliver Wanger orders the California Department of Water Resources to restrict pumping from the Delta during certain critical times pursuant to the Endangered Species Act to protect to the Delta Smelt - known as the Wanger decision

This restriction caused MWD to alter their water import amounts and look for alternative water resources to meet the demands

MWD acquires water transfers at a net cost of $250/AF

One of the resource actions that MWD used to balance the water resource need was to ask IAWP users to reduce water use by 30%

Not only did Ag comply with the request, but sustained it for all of 2008

IAWP/Long Range Finance Plan

In August of 2007, CAC and their Southern California Agricultural Water Team (SCWAT) recognized that the Wanger decision would have lasting and devastating affects on the IAWP

SCAWT, through their consultant, requested a meeting with MWD staff to see if a change could be made in the IAWP to reduce the impacts on Ag

MWD staff was willing to look at alternatives and for the next 10 months, worked with SCWAT and their consultant to formulate an alternative program

MWD and SCAWT recognized that as a result of the Wanger decision, that supplemental water would not be available in Southern California in the near term

MWD Supply ImpactsAverage Annual Supplies

-950K

Water Supply Conditions

Los Angeles Los Angeles AqueductAqueduct

Colorado RiverColorado River AqueductAqueduct

State Water State Water ProjectProject

LocalLocal

California Water - 2008

Lake Oroville Storage Level

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Acr

e-fe

et

Current Storage Level = 1.03 MAF (29% of capacity)

Reservoir Capacity - 3,537,600

Lowest End-of-Oct Storage Level Since 1977

San Luis Reservoir Storage LevelSWP Share

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Acr

e-f

eet

Current Storage Level = .147 MAF (14% of capacity)

SWP Capacity - 1,062,000

Diamond Valley Storage Level

300,000

400,000

500,000

600,000

700,000

800,000

900,000

Acr

e-f

eet

Current Storage Level = .45 MAF (56% of capacity)

Reservoir Capacity - 810,000

Lowest Storage Level Since Reservoir Fill

MWD Storage Conditions

January January 20072007

January January 20082008

Estimated Estimated January January

20092009

~ 1.7 MAF~2.2 MAF

~ 1.1 MAF

~670 TAF ~670 TAF ~670 TAF

2009 MWD Supply Outlook

Projected Initial SWP Table A allocation ≈ 15-20% (300–400TAF)

CRA Supplies ≈ 850TAF – 1MAF

WSDM Storage Available ≈ 1.1 MAF

Water Transfer – MWD will participate in DWR Drought Water Bank, 150+ TAF

If MWD Shortage Allocation Plan is implemented ≈ 5-20% Cut

MWD Supply/Demand Balance CY 2009

CRA CRA

SWPSWP

Transfers/Storage/Conservation/

Allocation

Transfers/Storage/ Conservation/

Allocation

0

500

1,000

1,500

2,000

2,500

15% SWP Allocation 35% SWP Allocation

2009 Demand of 2.2 MAF

570 TAF

1 MAF

Th

ou

san

d A

cre

Fee

t

IAWP Revisions

IAWP Revisions

MWD Board adopted the following revisions to the IAWP at its October Board meeting

Revision elements:1) 4-yr IAWP phase out period2) Opt-out provision 3) Ag conservation program 4) Ag water use reduction contracts5) Tier 1 limit adjustment6) Water Supply Allocation Plan adjustment

IAWP Phase Out

IAWP discount and supply reduction provisions (shortage cutbacks) are the same for 2009

Starting in 2010 the IAWP discount and supply reduction amounts will begin to decrease

Maximum amount of deliveries under the IAWP will be revised downward annually

As of January 1, 2013, the IAWP will no longer exist and water rates and reliability levels for Ag use will be equivalent to full service customers

IAWP Phase Out – Discount level

Calendar YearTreated IAWP

DiscountUntreated IAWP

Discount

2008 $114/AF $90/AF

2009 $114/AF $90/AF

2010 $86/AF $68/AF

2011 $57/AF $45/AF

2012 $29/AF $23/AF

2013 $0/AF $0/AF

MWD Allocation Plan

IAWP Reduction Percentage

Shortage

Level

Shortage % 2008 2009 2010 2011 2012

0 Voluntary

Up To 30% Up To 24%

Up To 18%

Up To 11%

1 5% 30% 30% 24% 18% 11%2 10% 30% 30% 25% 20% 15%3 15% 40% 40% 34% 28% 21%4 20% 50% 50% 43% 35% 28%5 25% 75% 75% 63% 50% 38%6 30% 90% 90% 75% 60% 45%7 35% 100% 100% 84% 68% 51%8 40% 100% 100% 85% 70% 55%9 45% 100% 100% 86% 73% 59%

10 50% 100% 100% 88% 75% 63%

IAWP Phase Out – % Reduction

Opt-Out Provision

Growers are able to immediately opt-out of the IAWP and purchase water at full-service water rates with the full-service level of reliability

MWD opt-out notification deadline - January 15, 2009− Check with your retailer for their deadline Growers may also opt-out of the IAWP at the end

of each year during the phase out period Once grower opts-out, they will no longer be

eligible for IAWP discount Growers must provide opt-out notifications to

retail agency, not MWD or its member agencies Growers opting out will still be held accountable

for performance against their 2008 reduction plans

Ag Conservation Program

MWD will work with SCAWT/CAC, member agencies and others to develop a new Ag conservation program

Program will provide financial incentives to encourage the use of devices and activities that lead to greater water use efficiency in the agricultural sector

Ag customers opting out and paying full services rate will be eligible for incentives

First agricultural conservation incentives expected to be available by mid-2009

Contracts

MWD will offer dry-year water use reduction contracts to agricultural water users

Grower would agree to reduce water use for one-year upon call from MWD

MWD would only make a limited number of reduction calls over a given period of time

Example: PVID Land Management Agreement

Contract would be between MWD, member agency, and grower

Template for contracts will be developed by the end of 2009

Member Agency Adjustments

MWD Water Supply Allocation Plan (SAP)

− Allocation based on historical data that did not include IAWP deliveries

− SAP baselines will be increased as IAWP delivery is reduced through opt-out or phase out provisions

Tier 1 Limit Adjustment− IAWP deliveries were not originally included in

the calculation of minimum purchase quantity− As the IAWP deliveries decrease, each member

agency’s annual Tier 1 limit will be increased

SDCWA Special Ag Water Rate

SDCWA Board unanimously approved a 2-year transitional program for those growers opting out of IAWP, but wishing to still take advantage of the SAWR

Program provides same SDCWA discounts for storage and supply charges (currently $51/AF & $44/AF) as provided continuing IAWP participants

Two conditions of transitional program− Subject to same reduced allocation from ESP and CSP − Subject to MWD’s regional M&I cutback

SDCWA will form a workgroup to consider future options

IAWP Decision Support

Opt-out Considerations

Growers are able to opt-out and purchase water at full-service water rates with full-service reliability

Opt-out notification deadline - January 15, 2009

−Check with your retailer for their deadline Decision Factors−30% IAWP cutbacks will remain in place for ‘09−Likelihood and extent of MWD urban cutbacks−MWD Full Service Rates vs. IAWP Rates Once grower opts-out, no longer be eligible

for IAWP discount

Shortage Allocation Plan/IAWP

RetailShortage

Stage

RetailReduction

IAWPReduction

Stage 1 5% 30%

Stage 2 10% 30%

Stage 3 15% 40%

Stage 4 20% 50%

Stage 5 25% 75%

Stage 6 30% 90%

Stage 7 35% 100%

If necessary, retail shortage allocation declared in April ‘09

Allocation period – July ‘09 through June ‘10

Current ReservesCurrent Reserves

Emergency

Available

Unavailable

Available in Year 1

Available in an Emergency

Not Available in Year 1

Step 1-Determine Available Supplies

Some of this water will be available in

Year 2


Available

Step 2-Reserves for Year 2

Save For Year 2Amount depends

on Year 2 conditions and risk

tolerance


Available

Step 3-Set Allocation Trigger

Save For Year 2

Allowable Storage

Drawdown


Available

Step 4-Forecast Drawdown & Determine if Allocation is Needed

Save For Year 2

AllowableStorage

Drawdown

Drawdown forecast depends on Year 1 conditions and risk

tolerance


Available


Save For Year 2

Allowable Drawdown

Supplies available at year’s end, no

allocation necessary



Save For Year 2

Allowable Drawdown

No supplies available at year’s

end, allocation necessary

MWD Allocation Considerations

SWP Allocation− 0% to 35% – M&I allocation certain/highly likely− 36% to 50% - M&I allocation likely/possible− 51% to 100% - M&I allocation unlikely Impacts to MWD storage levels− Approximately 1.1 MAF currently in storage− Indicated 575 TAF may be available in 2009 Progress on near-term actions in Delta Demands on MWD Information available by notification deadline− December 1, 2008 Initial Allocation− Precipitation from Oct. – Dec. = 35% of SWP Water Year

total

Projected MWD Rate Increases

MWD has begun developing preliminary estimates of “average” water rates for 2010

Current estimates for 2010 rates range from 15% to 21%

Projected increases for later years are 3-4%

Difference between treated and untreated assumed the same treatment surcharge level throughout the phase out period

Future rate increases will likely be higher if 2009 is dry

Projected MWD Water RatesProjected Treated, Tier 1 Rates

Rate Increase 2009 2010 2011 2012 201315% increase in 2010,

3% thereafter $579 $666 $686 $707 $728

21% increase in 2010, 4% thereafter $579 $701 $729 $758 $788

Projected Treated, IAWP Rates

Rate Increase 2009 2010 2011 2012 201315% increase in 2010,

3% thereafter $465 $580 $629 $677 $728


Projected Untreated, IAWP Rates

Rate Increase 2009 2010 2011 2012 2013



Scenarios

Scenarios

Use scenarios to look at impacts to growers

−Scenario 1: No MWD Allocation−Scenario 2: 10% MWD Allocation−Scenario 3: 15% MWD Allocation Compare Opt-out reliability vs.

IAWP Compare Treated, Tier 1 rates vs.

IAWP rates Compare 15% vs. 21% rate

increase Assumed water use: 10-acre grove

with 4 AF/AC/YR

2009 Scenarios

ScenariosScenario 1:

No AllocationScenario 2:

10% AllocationScenario 3:

15% Allocation

Opt-out IAWP Opt-out IAWP Opt-out IAWP

MWD Allocation 100% 70% 90% 70% 85% 60%

Water for 10-acre grove (AF) 40 28 36 28 34 24

Price of Water ($/AF)(Treated, Tier 1 vs IAWP)

$579 $465 $579 $465 $579 $465

Cost of Water for 10-acre grove $23,160 $13,020 $20,844 $13,020 $19,686 $11,160

Eligible for MWD Funding Yes No Yes No Yes No

2010 Scenarios

Scenarios

Scenario 1: No Allocation

Scenario 2: 10% Allocation



MWD Allocation 100% 76% 90% 75% 85% 66%

Water for 10-acre grove (AF)

40 30.4 36 30 34 26.4


$666-$701

$580-$615

$666-$701

$580-$615

$666-$701

$580-$615

Cost of Water for 10-acre grove

$26,640-$28,040

$17,627-$18,684

$23,976-$25,236

$17,396-$18,438

$22,644-$23,834

$15,308-$16,225


2011 Scenarios

Scenarios

Scenario 1: No Allocation




MWD Allocation 100% 82% 90% 80% 85% 72%

Water for 10-acre grove (AF)

40 32.8 36 32 34 28.8


$686-$729

$629-$672

$686-$729

$629-$672

$686-$729

$629-$672

Cost of Water for 10-acre grove

$27,440-$29,160

$20,625-$22,029

$24,696-$26,244

$20,122-$21,492

$23,324-$24,786

$18,110-$19,342


Next Steps

Track 2009 water supply conditions Assess the likelihood and extent of

an allocation of supplies by MWD Monitor MWD 2010 rate setting

process Work with MWD to develop Ag

Conservation Program Update growers through CAC and

SCAWT

2009 Water Year Precipitation

Questions

Additional Slides

Mil

lio

n A

cre-

feet

There is a range of potential impacts on SWP Deliveries

Prior to Wanger Decision

Range w/ Wanger Decision

2008 SWP Table A Allocations

Range of 2009 SWP Supplies

0.00.20.40.60.81.01.21.41.61.82.010

0% 94%

88%

82%

76%

70%

64%

58%

52%

46%

40%

34%

28%

21%

15% 9% 3%

Mill

ion

Acre

-Fee

t

Likelihood of Exceedence

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.010

0% 90%

80%

70%

60%

50%

40%

30%

20%

10% 0%

Mil

lio

n A

cre-

feet

There is a range of potential impacts on SWP Deliveries

Prior to Federal Decision

Range w/ Federal Decision

2008 SWP Table A Allocations

LRFP Update/IAWP Discussion

Statements in Support - the program: - Generates revs from water that wouldn’t be sold- Provides regional water management benefits

that reduce likelihood of shortage allocations to M&I users

- Helps sustain an important segment of the economy

- Provides environmental benefits- Public supports the program

Criticisms of IAWP - - Ag deliveries are not fully interruptible prior to full

service cuts, thus IAWP discount should be smaller

- Decision to provide discount to Ag users is best made at the member agency level

- Concern that MWD is securing water transfers while simultaneously selling surplus water for Ag use at discount

Cumulative Supply Need Beyond Existing Storage (2009-2013)

Million

Acre

-Feet

WSDM Plan Actions

Extreme Shortage

5 4 3 2 1 Actions 1 2 3 4 5 6 7Make Cyclic Deliveries

Fill Semitropic, Arvin-EdisonStore supplies in SWP Carryover

Fill Contractual GWFill Monterey Res.

Fill Diamond Valley LakeConduct Public Affairs ProgramTake from Diamond Valley LakeTake from Semitropic, Arvin-Ed.Cut LTS and Replen. Deliveries

Take from Contractual GWTake from Monterey Res.

Call for Extraordinary ConservationReduce IAWP DeliveriesCall Options Contracts

Buy Spot WaterImplement Allocation Plan

Potential Simultaneous Actions

Surplus Stages

Surplus

Shortage Stages

ShortageSevere

Shortage

Long Range Finance Plan Update

February 2007 - During CY 2008 rate setting process, MWD Board requests review of LRFP

July 2007 - Workgroup begins discussion of rate structure issues, including IAWP

December 2007 - MWD staff distributes IAWP White Paper

January 2008 - Ed Means presents to Workgroup

March 2008 - Staff presents 6 IAWP options April 17, 2008 - Workgroup reviews options May 13, 2008 - MWD Board reviews options June 9, 2008 - MWD Board approves six month

process to “evaluate” options

Resource Options – MWD 5 year Plan

Resource OptionsAdd’l Annual

YieldTAF

Conservation 215 - 415

CR Transactions 100 – 250

Near-Term Delta Actions 0

SWP Transactions 110 - 350

Groundwater/Runoff Recovery 25 - 80

Local Resources 5 -7

Total 455 – 1,102

MWD Ag Water Sales History

MWD deliveries for agriculture started in

1958 Objective: sell “surplus” water at a discount

in exchange for:− Additional revenue− Ability to interrupt a portion of deliveries prior to

curtailments to firm deliveries

1981 - the discounted rate was rolled into MWD’s “Interruptible Program”

1991 - MWD had to interrupt deliveries, agencies argued against 100% interruption

MWD adopts new plan which cut Interruptible deliveries at a higher % than noninterruptible

Interim Ag Water Program History

IAWP was negotiated in 1994 Program provides a discounted rate in

exchange for up to a 30% initial cut to Ag customers prior to M&I users being cut

1999 Kelly amendment provides that ag water not sold at a discount is deemed for M&I uses and thus not surplus

Wanger Federal Court decision cuts likelihood of surplus from 70% to 30%

Ag customers are required to cut demands for the first time in 2008

IAWP/Long Range Finance Plan

MWD has used reserves in three out of the last four years to moderate rate increases -nearly 40% of its rate stabilization reserves

An LRFP Workgroup of MWD’s member agencies, sub-agencies and staff was formed to review identified issues and develop options for the Board

IAWP included in LRFP update because the IAWP rate is not based on “cost of service” as are majority of MWD’s rates

Workgroup identified six options for the future of the IAWP for Board review

MWD Supply/Demand Balance CY 2009

0

0.5

1

1.5

2

2.5

Million A

cre F

eet

WSDM Actions SWP @ 35 percent CRA

770 TAF

705 TAF

734 TAF

2.2 MAF – Current Trend Demands

Southern California Agricultural Water Team

Documents

Transcript of Southern California Agricultural Water Team