Water Authority Asks Public To Weigh In On Proposed Desalination Agreement

ST. JOHN: It's Wednesday, October 3rd, I'm Alison St. John in for Maureen Cavanaugh. Today we'll talk about water. Some say water is the most important issue for San Diego's future. After all, civilizations have risen and fallen when their access to water dries up. This week, the San Diego County water authority released an important draft agreement to buy water from a proposed water desalination plant, which if it comes online, could provide enough water to cover 7% of San Diego's water needs. So the Carlsbad desal project is our topic today. And we want to know what you think. Sandra Kerl, deputy director of the San Diego water authority. Thank you so much for joining us. Let's just start, how important is this agreement in the bigger picture of all the things that the water authority is doing to secure our water future? KERL: This is a really important component of our diversification strategy that we have been working on for a number of years. Desalinization has been in our plans for quite some time, and once the project is fully online, it'll represent 7% of our local water supply. And that is directly controlled and not subject to outside forces making that water available. ST. JOHN: This is a 30 year agreement, right? KERL: Yes. ST. JOHN: You had a public hearing last night on the draft plan. Did many people show up? KERL: We had a community meeting, and our water planning committee heard from the community. We had probably about 100 people at our Kearny Mesa facility talking about the project, talking about the water purchase agreement and their views on it. ST. JOHN: Can you give us a thumb nail of some of the issues that were discussed? KERL: Well, like any major issue, there are certainly folks on both sides of the issues. A number of folks think that the desal plant has already been implemented, and they're getting water from it today. So that was an interesting perspective. ST. JOHN: It has been around, the idea, for a long time. KERL: Yes. ST. JOHN: But nothing is there yet. KERL: Yes. ST. JOHN: We do have another project in Oceanside, a small one. But this is the largest on the west coast, right? KERL: That's correct. So we heard a lot of folks interested in it having the project go forward as soon as possible. There are concerns about the project from the folks who have been contesting the project since its conception ten years ago. And those concerns, environmental issues, have been addressed through the permitting process. But they continue to have some concerns about that. ST. JOHN: Okay. So now, what is the impact that any public testimony could have now? You've mentioned this has been in the works for ten years. If people have comments on this agreement, what implements could that possibly have at this point? KERL: Well, certainly our Board of Directors is very interested to hear what the public thinks about the water purchase agreement, how we're moving forward with the desal project, and it will interest into their decision making process on whether or not to approve entering into this contract. ST. JOHN: All right. Let's talk a little bit about the costs. I think that's a contract, right? KERL: Yes. ST. JOHN: And it's going to affect our water rates. The county water authority under this agreement would be $115 million a year to Poseidon, and some estimates suggest that that would raise our water rates between 8-11%. What sort of dollar figure might somebody see on their bill as a result of this? KERL: For a residential customer, single family household, it would be somewhere between $5 and $7 per month on their water bill. And it's important to note that yes, it is higher cost water, but any next increment of new water supply fits within those ranges. So if we are to bring new water into this region, what are we looking at for cost? ST. JOHN: So $115 million a year, and the ratepayers are the ones who will recoup that cost to the water authority. I understand right now, conservation is only $10 million of your budget. In Marin, for example, the district up there found they were able to meet the demands for water through conservation. Why is that not an option for San Diego? KERL: Well, we do put a lot into conservation, and San Diego County has a whole has done an amazing job, and conservation is a big part of our portfolio. And we count on it, and certainly there's opportunities to do further conservation, but one of the things to keep in mind is being at the end of the pipe in San Diego, you can serve, but you still need a source of water. And the sources of water that we currently depend on, coming from the state water project, and the Colorado river have risks. And we want to make sure that we have a source, a supply which is guaranteed long into the future. So it's about again providing that long-term reliability. ST. JOHN: This is only one of the strategies that the authority is pursuing, right? KERL: That's correct. ST. JOHN: Desalination is not the only thing you're pursuing. But it is much more expensive than recycled water. Why is the authority pursuing desalination before recycling? KERL: Well, actually two things. One is that the cost of recycled water, when you look at it on a straight cost basis for the water, actually is comparable to the cost of desalinated water, and in fact a little bit above the cost of desalinated water. Our project is a fully vetted bid project, so its actual cost, the costs that are in place right now for the recycled water really are at a planning stage. It's also important to note that the -- it's not an either/or situation. We're pursuing many strategies and have been supportive of the efforts of our member agencies to do recycled water as well, adding to the long-term local supply. ST. JOHN: There is a certain amount of political resistance to recycling, isn't there? There's been a certain amount of promotion of it as being toilet-to-tap, and that's been hard to overcome. Is that one reason why you're pursuing a more expensive strategy now? KERL: Certainly not. And I think opinions have changed quite a bit about recycled water, and there's quite a bit of public acceptance. Again, it's a multipronged approach to insure that we have several things in our portfolio so we're not dependent on one source. We've come a long way since 1995 when 90% of our water came from metropolitan water district. ST. JOHN: So one of the criticisms in the past has been that desalinization will damage marine life. KERL: Through the protecting process and the design of the project, those issues have been addressed. One of the things that is changed over time with the desalination process, it has improved and improved over the 10 years since this project was originally envisioned. And we have the best technology, which provides optimal protection to marine life, and that was considered in the permitting process. ST. JOHN: So it will presumably have some marine damage, but the latest iteration of it has presumably minimized that. KERL: That's correct. And the membranes themselves are so fine that very little of the Marine life does get, as they call, entrapped into the filters and is very sensitive to insuring the continued health of the Marine life. ST. JOHN: The big question here I think is money. This really is going to raise water rates. And we know water rates are going to go up in the future, but is this 30 year deal going to end up as a liability for San Diego County? I think that's what the critics are concerned about. For example, it's one of the most energy-intensive ways of generating water. Supposing our energy cost ares go you will unexpectedly in the future. Does this contract protect ratepayers from unexpected increases? KERL: Well, a couple of things to focus on with that question. No. 1, yes it is energy-intensive. The water authority has the ability to supply power to the project in the event we have the opportunity to do that, such as through hydro power, which will provide an opportunity to reduce the cost of electricity. In order to get a project put together that would be financeable and marketable, the water authority assumes the price risk on electricity, just like we would with any other source of water. The state water project uses quite a bit of electricity. We have that same risk today with getting water to San Diego region. The contract calls for the consumption risk, or how much electricity is used. That is borne by the contractor. So if they do not live within the amount of energy that is in the contract, they pay 100% of those additional costs. ST. JOHN: All right. There's another element of this contract, which I not is controversial, that if there's no need for water, then the plant still has to keep producing which is kind of benefiting the investors, Poseidon, the private company avenue investors, rather than the ratepayers, isn't it? Is that not a sort of disadvantage to San Diego rate payers under this contract? KERL: Well, one of the things we've spent a lot of time on is our demands and ensuring that this source of supply is something that is needed in our system. And the plant has the capacity to produce up to 66,000 acre feet a year, but under the contract the authority would only be required to take 48,000 feet a year of water. And we feel that is well within our ability to take. Again, it is a guaranteed local source of supply. If we need additional water, we can go up to the 56,000-acre feed, but we believe the 48,000-acre feed is well within our need. ST. JOHN: You don't think we'll ever need less than what they're produce something. KERL: That's correct. ST. JOHN: Now, when must they make the decision? KERL: The member agencies have the ability to just take the water through our system as part of the water supply. If they want it to be their own local supply, they can enter into a contract with the water authority for a certain amount of that water. And what that means is in the event of a drought, and there's cutbacks, they would not be cut back for that amount of water that they purchase. For them to purchase that water directly, they have to pay 100% of the cost of getting that water. If they just purchase water through the water authority, are the cost of the desalinated water is melded in with all of our other supply costs and results in a much lower cost of that water to them. ST. JOHN: You delayed the release of the agreement recently. And I know it's been in the works for a long time. But what were the final sticking points that meant that it came out a few days later. KERL: Well, as you can imagine, with a 30 year agreement, it's very complicated both on a technical and a financial level, and it was just some final details and negotiations with Poseidon to make sure that we felt that we had everything in that agreement that we thought was important to present to the board. ST. JOHN: Apparently any legal disputes between the authority and Poseidon will take place in courts in San Diego County. Why was this important? KERL: It's always important when you're doing an agreement to ensure that you have a dispute resolution process. And we wanted to make sure we had all the bases covered. Again, it's a third-year agreement, and we get 1 shot at doing this right. ST. JOHN: Right. What kind of protection is there for the agency if Poseidon goes belly-up? KERL: The water authority has several protections. We have the ability to come in and cure and take the project over and to only refund the bond cost so the water authority would have the opportunity to take over the project at a lower cost. We have the ability to let it go. So it's really at a decision of the water authority. There's no have-to in the event that Poseidon defaults, that the water authority is required to take over that obligation. ST. JOHN: Is there a desalination plant like this, are as big as this in the United States that's operation successfully? KERL: My understanding, not at this size. There are many other plants in the United States. But this particular plant is what we call a sister plant to a plant that was built by IDE, which is going to be the process -- they have the technology and the operation responsibility. And it's similar to a plant that has been in operation in Hadera, Israel. ST. JOHN: What other permits will it need? Are there a lot of other hurdles to overcome? KERL: No, there are not. The project is fully permitted. If the water purchase agreement is approved by our board, we would go forward to financing and then construction. ST. JOHN: And just finally, you have not yet voted on this contract. This is a huge commitment, right? KERL: That's correct. ST. JOHN: What could public input you do at this point? In fact, how could it even influence the contract? KERL: Well, it could certainly guide the board's decision of whether or not they felt that this was a good investment for the water authority and for the San Diego region as a whole. The public opinion is very important to our Board of Directors, and I encourage folks to come out and share their opinions. We also have another public meeting, which is scheduled for next Wednesday in Carlsbad at 6:30 PM at the Faraday center. And if they're interested, they're more than welcome to come join us. ST. JOHN: When will you finally vote? KERL: That will be up to the Board of Directors when they feel they have adequate information and have had adequate opportunity to review the project, they will make that decision. ST. JOHN: Is there even an option that it wouldn't happen at this point? KERL: Certainly. This is not a done deal. This is completely up to our Board of Directors to make the decision if they think this is an appropriate agreement. ST. JOHN: Okay. Well, thank you so much for coming in. KERL: Thank you.