On September 21, Dennis Cushman, Assistant General Manager , along with Peter MacLaggan of Poseidon Resources, provided a presentation at the San Diego Regional Economic Development Corporation's Investor Breakfast. Topics included water supply and reliability, water rates, and seawater desalination.

1. San Diego County
Water Issues
2010 Update
San Di
S Diego R i
Regional Economic Development Corporation
lE i D l tC ti
September 21, 2010
1

2. Today s
Today’s Presentation
Dennis Cushman – San Diego County Water Authority
Water Authority background
h b k d
Water reliability strategy
Supply diversification
Rates
Key water issues
Supply challenges
MWD rates
QSA litigation
Water bond
Andrew Poat – San Diego Regional EDC
Recycled water
Peter MacLaggan – Poseidon Resources
Carlsbad Desalination Facility
2

3. 3

4. What Is the Water Authority?
Wholesale water agency
g y
created by State Legislature in
1944
24 member agencies
membe
36-member board of directors
Se es 3.2
Serves 3 million peop e a d
o people and
region’s $174 billion economy
Service area
950,000 acres
97% of county’s population
4

5. Sources of San Diego County’s Water Supply
LAKE
SHASTA
San Diego County
LAKE imports ~80% of its
OROVILLE
water supply
State Water Project
(Bay-Delta)
30%
Colorado River
50%
Local Supplies
and Conservation
20%
5

6. Imported Water Sources
Colorado River Supplies State Water Project Supplies
Department of Interior California Department of
C lif i D t t f
Bureau of Reclamation Water Resources
All American and
Coachella Canal
C h ll C l
Priority 1: Palo Verde Irrigation District Lining Projects
State Water Project
Priority 2: Yuma Project
Contractors (27)
Metropolitan Water District of Southern California
Priority 3a: Imperial Irrigation District
26 Other Contractors
Priority 4 and 5a:
Metropolitan Water District
of Southern California
San Diego County Water Authority
24 Local Retail Agencies and cities
6

7. Supply Diversification
7

8. Regional Water Supply Diversification
1991 2010 2020
5% 10%
6%
3% 4% 11%
16% 3% 7%
4%
95%
10% 6%
10%
9%
29%
50% 22%
Metropolitan Water District Seawater Desalination
Imperial Irrigation District Transfer Local Surface Water
All American & Coachella Canal Lining Recycled Water
Conservation Groundwater
Dry-Year Water Transfers
8

9. Q
Quantification Settlement Agreement
g
Colorado River QSA Supplies
Q pp
Imperial Irrigation District transfer
200,000 acre-feet*/year for 45 to 75
years
Canal-lining projects
C l li i j t
80,000 acre-feet**/year for 110 years
Key to supply diversification
strategy Canal-lining project
C l li i j t
Provides 165,000 acre-feet in 2010;
helps mitigate current shortage
By 2021 will provide 30% of
2021,
region’s supply
Lining the Coachella Canal
*At full implementation in 2021
** Acre-foot = 325,900 gallons
9

10. Groundwater and Recycled Water
Recycled Water
28,000
28 000 af/year today growing to
today,
52,000 af/year by 2020
High-quality, drought-proof water
supply
17 agencies in San Diego produce
recycled water
Primarily used for landscaping irrigation
Groundwater
13,000 f/
13 000 af/year t d
today, growing t
i to
53,000 af/year by 2020
San Diego does not have significant
underground storage basins
Brackish groundwater must be
Sweetwater Authority’s groundwater
desalinated
desalination plant
Six local agencies have groundwater
projects
10

11. Conservation
Comprehensive water
conservation programs
programs,
incentives and school
programs since 1990s
65,000
65 000 af/year today
today,
growing to 94,000+ by
2020
Cumulative savings: more
C l ti i
than 600,000 AF
Water efficient planting and rotating nozzle
Shifting emphasis
g p
from indoor to
outdoor conservation
11

12. Seawater Desalination
Carlsbad Desalination Project
Produce up to 56,000 acre-feet annually
Approved term sheet that will lead to
water purchase agreement to buy output
p g y p
of plant
Camp Pendleton Project
56,000
56 000 to 168,000 af/year
168 000
Feasibility studies under way
Bi-national Desalination Project
Encina Power Station, Carlsbad h d
In conjunction with agencies in Nevada,
Arizona and Mexico
Studying site in Baja California
12

13. 13

14. Water Authority Rates 2011
Water Authority Board d t d
W t A th it B d adopted CY 2011 rates
t
following public hearing in June
Treated water rate – up 11.3% ($1,026/AF)
11 3% ($1 026/AF)
Untreated water rate – up 14.7% ($811/AF)
Primary drivers of rate increases:
y
Costs to purchase, deliver imported water
Costs for operating, maintaining and financing regional
water system
t t
14

15. Cost of Water Drives Treated
Water Rate* Increases
“All-in” Increase
All-in Water Authority Melded Supply
Distribution Rate Increase
$104/AF $65/AF
MWD
Transportation
p 75%
8% ($49)
($8)
Storage
21%
($22)
Customer
Service Supply
9% 62%
($9) ($65)
Water Authority
25%
($16)
*Municipal and Industrial Rate
15

16. Mitigating Rate Impacts –
Water Authority Actions
Current budget eliminated more than a dozen
positions
$2.4M reduction made mid-year in FY 2010 &
2011
Reduction in spot water purchases
Rate stabilization draw – up to $10.7M
$10 7M
MWD rate challenge
Lawsuit challenging MWD’s rates and how they’re
allocated
16

17. Supply Challenges
MWD Rates
QSA Litigation
Water Bond
17

18. Supply Challenges
pp y g
Regulatory restrictions
g y
Fish protections limit State
Water Project deliveries
Lingering effects of
drought
Lake Oroville – April 2010 Storage still recovering
Heading into another dry
winter? (La Niña?)
Effects of climate change
18

19. Response to Supply Challenges
p pp y g
Water Shortage and
Drought Response Plan
Implementation
8% regional target
beginning July 1, 2009
1
Target in effect through
June 30, 2011
30
19

20. Region Succeeding in Saving Water
August ‘09 – July ’10 Urban Water Use
Acre-feet
600,000 18%
606,400
606 400 below
550,000 ’07/08 12% below
561,300 ’08/09
500,000
500 000
495,100
450,000
400,000
2007/08 2008/09 2009/10
350,000

21. San Diego County: 1991 vs 2010
vs.
$174
3.2 1.3
578 2.5 1.08 $65 566
1991 2010
Water use (thousand acre-feet) Jobs (millions)
Population (millions) Gross Domestic Product (billions)
21

22. MWD Rate Challenge
Water Authority filed it i J
W t A th it fil d suit in June against MWD
i t
over its 2011-2012 rates
Violates California law, standard practices
law
MWD improperly overcharges for transporting
water through its facilities
g
MWD improperly subsidizes the price of water it
sells
22

23. MWD Misallocating Its Costs
23

24. Impacts to Local Ratepayers
*Based on 600,000 AF annual sales; 2021 figure includes
$40B Delta fix share
24

25. Impacts on Supply Reliability
By disguising true cost
of i
f imported water,
t d t
MWD discourages local
supply development
Disincentive to
pursuing conservation
and local supply
projects
Disincentive to
transfers that require
use of MWD’s facilities
Desalination membranes These kinds of projects
help protect region
from supply shortages
25

26. QSA Litigation
January 2010: Superior Court ruling invalidated 13
agreements
Includes IID transfer and canal-lining agreements
Ruling based on single sentence in one agreement
State’s bli ti t fund
St t ’ obligation to f d
Salton Sea mitigation found
unconstitutional
Water Authority and other
agencies appealed ruling
Temporary stay allowing
transfers to continue
Appellate Court decision
expected in 2011
All-American Canal 26

27. 2012 Water Bond Summary
$11.14 billion bond on Nov. 2012 ballot
$2.25 billion for Bay-Delta ecosystem restoration
$3 billion for statewide surface storage
$1.4 billi f W
$1 4 billion for Water Supply Reliability
S l R li bili
$455 million for drought relief
$1.785
$1 785 billion for watersheds
$1 billion for groundwater clean-up
$1.25 billion for conservation, recycling and
desalination
27

28. 2012 Water Bond Highlights for San Diego
$227 million in dedicated
funding
$100 million for regional storage
and supply reliability projects
$87 million in funding for local
supply reliability projects
$40 million in funding for local
watershed projects
t h d j t
Competitive grants for:
Drought relief projects
Conservation, recycling, desalination
Environmental protection and
restoration
Climate change adaptation
28

29. 2012 Water Bond Fund Categories and
San Diego Co nt ’s 2020 Supply Di e sification
County’s S ppl Diversification
$100 million for regional storage
$
$40 million for San Diego
g
watersheds
$1 billion for groundwater
clean-up
$1 billion for recycling
and seawater
desalination
Other Bond Funding: g
$265 million for drought $250 million for
relief projects conservation
$2.25 Billion for Bay Delta Ecosystem
Improvements
$3 billion for new statewide surface storage
29

30. Co t u g Challenges
Continuing C a e ges
Achieving Bay Delta fixes
Bay-Delta
that restore reliability
Rising water rates
g
Sustaining new water use
ethic
Resolving MWD and QSA
legal disputes
g p
Water bond passage? Bay-Delta waterways
30

31. Recycled Water
ecyc ed ate
31

32. Carlsbad
Desalination Project

33. Carlsbad Desalination Project
33

34. Site Configuration

35. Delivery System

36. Project Benefits
Provide 56,000 AFY of high quality drinking water
g q y g
Offset the need for an equivalent amount of imported
water
Improve local water supply reliability
Provide for long-term stewardship of Agua Hedionda
Lagoon
Restore and enhance of 66 acres of marine wetlands
Fully mitigate increase in GHG emissions over baseline
36

37. Status and Timeline
Permitting and entitlements complete
Initial phase of construction underway
Finalizing engineering, procurement and
g g g, p
construction contact, water purchase
arrangements, and project financing
Project will be fully operational 30 months
after start of next phase of construction
p
37

38. Construction Commenced - November 2009

39. Questions
39