Orange County elected officials love to brag about their fiscal thrift and frequently criticize government subsidies. I wonder how they will feel about subsidizing Huntington Beach for the 30-year term of the Poseidon desalination project.
There is a little-known fact behind Poseidon’s boutique water project in Huntington Beach. In order to sweeten the deal for project approval, Poseidon offered the city a discount of 5% below Metropolitan Water District (MWD) imported water rates on up to 3 million gallons of water per day (3,360 acre-feet per year). For this minor savings to the city, it may cost the other participants upwards of $100 million over the life of the contract.
Most people tune out when math is involved, so hang on and let’s walk through this. Currently Tier 1 fully loaded imported water from MWD is $915 per acre-foot. That means that the city would normally pay $2,856,000 for 3,360 acre-feet. A 5% discount would reduce the City’s annual water costs by $150,000.
But Poseidon isn’t buying MWD water. They will be manufacturing their own water, and the difference between their rate and MWD’s rate is the subsidy. Until recently, it was not possible to get realistic numbers from Poseidon. But the San Diego County Water Authority signed a contract at the end of last year and agreed to pay between $1,849 and $2,064 per acre foot (with significant escalators for electricity and other unforeseen challenges). Using their numbers as a basis, the difference in cost between imported water and Poseidon’s water will be a subsidy of between $3.2 and $3.9 million per year.
There are other subsidies hidden in Poseidon’s water scheme, including a $12.5-million per year subsidy from MWD to offset the costs of this boutique water. There are multiple desalination projects proposed for Southern California, and every additional 50 mgd project will add another $12.5-million subsidy to the bill. This money would be more prudently spent on more affordable water strategies, such as expanding reuse, efficiency, conservation, code changes and market transformation.
Data compiled in a 2008 water use study by the Center for Demographic Research demonstrates huge opportunities in Orange County to reduce water consumption. The differences in per-capita consumption are shocking, with Santa Ana at 109 gallons per person per day and Newport Beach at 247 gallons per person per day. By contrast, the average Australian uses 40 gallons per person per day. Undoubtedly some progress has been made in Orange County in the past five years to reduce per-capita consumption, but the disparities between cities should serve to remind us that household income and equity must also be a consideration in our water strategies.
Before we embark on options that further exacerbate water rates, it seems like this would be a good time to pause and take a look at lessons learned in Australia, where four of six plants sit idle and water bills have doubled, tripled and quadrupled. Published government reports point to evidence that suggests a failure to inform communities and decision makers of costs, benefits and risks to water consumers of real options rather than traditional megaproject options. One factor that was highlighted as contributing to these failures included government subsidies that “distorted investment decisions.”
California’s water failures are widespread and well-documented. Many are outside the control of local officials, but many are not. One that is completely within our control is our five-year Urban Water Management Plan and its water demand forecasting. Accurate forecasting is important in terms of supply reliability. Expensive infrastructure decisions like ocean desalination are approved based on these projections.
Like most water agencies, Orange County has taken the easy way out, generally using per capita consumption and population forecasts as the predictor of future consumption. The Municipal Water District of Orange County (MWDOC) compiles all of Orange County’s plans and makes a regional five-year projection. Based on city and water district plans, they have always overprojected water demand. But between 2000 and 2010, water demand declined by 39,000 acre-feet with nominal conservation efforts. For 2035, MWDOC forecasts a 15-percent increase in population and a 17-percent increase in water demand. It is illogical in the face of state demands to reduce water consumption 20 percent by 2020, new appliance standards, rebates, economic conditions, rate structure changes, code upgrades and conservation to forecast a 17-percent increase in water demand in Orange County. Why are we not demanding better forecasting models?
There are communities that have adopted more accurate methods. In 2006, Seattle, Wash., revisited its faulty demand forecasting model, noting that “overestimates of future water demands can result in premature capital investments and stranded resources.” Seattle led the Puget Sound region in adopting a new forecasting model that incorporates the complexity of both the demand and supply side of water management. Between 1990 and 2010, Seattle experienced a population increase of 15% and a water demand decline of 30%. The region recently projected adequate water supply under every hydrologic scenario until the year 2050.
Even with Orange County’s faulty demand forecasting, MWDOC still forecasts adequate water supplies under every hydrologic scenario until 2035. Fifteen years should give us enough time to address our faulty forecasting and plan for responses that provide multiple benefits.
We will all be healthier and wealthier if Orange County would start living up to its meme of fiscal prudence. But we are on a path to financing a billion-dollar boondoggle.
On November 13 at Newport Beach City Hall, Poseidon will be seeking its final approval in front of the California Coastal Commission. Come and let your voice be heard.
Debbie Cook serves on the Voice of OC Community Editorial Board and is a former mayor and council member in Huntington Beach.