Water agencies work to minimize rate impacts
By Michael T. Hogan
A recent opinion article (“A plan to get us out of this financial mess,” Oct. 27) raised the important issue of the region’s water agencies working together to minimize impacts to ratepayers as much as possible.
As chair of the San Diego County Water Authority’s Board of Directors, I couldn’t agree more.
In fact, that has been a focus for the members of the board, who represent the Water Authority’s 24 member retail agencies (and, in turn, more than 3 million residents in San Diego County who rely on the Water Authority for some or all of their water supply).
None of us want to see our ratepayers pay more than is necessary to ensure they will have safe drinking water every time they turn on the tap or irrigate their fields or landscapes. That’s why we work diligently with the water authority’s management and staff to control the costs of day-to-day operations and capital projects in ways that do not jeopardize the present or future reliability of our water supply.
Over the last decade, the water authority indeed invested heavily in the region’s water infrastructure through its $3.5 billion Capital Improvement Program. This was part of a coordinated, forward-thinking vision by the region’s water agencies to improve the overall reliability of the region’s water supply. These investments have produced new dams, reservoirs, pipelines, pumping facilities and a treatment plant that greatly improve our ability to move and store water on a daily basis, and will help meet our region’s water needs if an emergency cuts off our imported water supplies. Other projects, such as our water conservation and transfer agreement with the Imperial Irrigation District and water-conserving canal-lining projects in the Coachella Valley and Imperial Valley, have secured new, highly reliable and long-term water supplies that our region needs to support our $186 billion economy and high quality of life.
Our board carefully scrutinizes the planning and budgeting for these projects. All water authority major construction projects are competitively bid to help get the best value for ratepayers.
The water authority has downsized to reflect reduced water sales revenues. For example, the water authority is executing a plan to reduce staff positions 16 percent between 2008 and 2014. As part of this plan, the water authority is eliminating 31.33 full-time positions during the current two-year budget cycle.
The workforce reductions are just one component of the water authority’s efforts to trim its budget. Overall, the current two-year budget (for fiscal years 2012 and 2013) features $235 million less spending on capital projects and a 7 percent decrease in the cost of operating departments compared to the previous two-year budget.
About $150 million of the capital spending reduction comes from deferring 14 capital projects to July 2014 or later. These are projects that don’t need to be built as quickly as first thought due to recent reductions in projected regional water use.
Like a homeowner with a mortgage, the water authority uses long-term financing to pay for its capital projects. These debt service costs will rise over the next decade, but the agency is aggressively pursuing every opportunity to refinance to minimize impacts to ratepayers. Since 2010, the water authority has executed three bond refinancing sales that will save nearly $20 million in financing costs on a present-value basis over the life of those bonds.
In addition, the water authority issued $528 million in Build America Bonds (BABs) in 2010, which receive a direct federal subsidy payment for a portion of borrowing costs. By using this bond program, part of the 2009 American Recovery and Reinvestment Act, the water authority saved ratepayers an estimated $50 million in financing costs.
However, one of the biggest drivers for water rate increases is increased water and transportation costs from the Metropolitan Water District of Southern California, our region’s largest imported water supplier.
In June 2010, our board unanimously approved filing suit against MWD over its rate structure. MWD improperly overcharges for the transportation of water and uses that money to subsidize the cost of MWD water. This violates California’s Constitution, other state law, and standard water utility practice.
In September, the Utility Consumers Action Network and the Imperial Irrigation District officially joined us in the legal fight against MWD.
MWD’s rate structure significantly harms the San Diego region. We will lose up to $31 million in 2011; those overcharges may grow to as much as $230 million annually by 2021, and total as much as $2.1 billion over the next 45 years. More information on the rate challenge is available at www.sdcwa.org/mwdrate-challenge.
Providing San Diego County with a safe, reliable water supply requires significant effort and cost. But as the above actions show, the water authority and its member agencies are aggressively working to minimize impacts to ratepayers.
Michael T. Hogan is chair of the Board of Directors for the San Diego County Water Authority.