With the implementation of the Quantification Settlement Agreement in 2003, the amount of Colorado River water available to the Metropolitan Water District of Southern California has been less than the capacity of the Colorado River Aqueduct (“CRA”). For example, the Bureau of Reclamation currently forecasts that Metropolitan’s use of Colorado River water will be 861,616 AF in 2015 http://www.usbr.gov/lc/region/g4000/hourly/forecast15.pdf. This is 438,834 AF less than the historical maximum annual amount of 1.3 million AF of Colorado River water conveyed through the CRA. Continue reading
Two recent transactions in western water (San Diego County Water Authority’s Carlsbad Desalination Plant and San Antonio Water System’s Vista Ridge Project) provide an opportunity to discuss the economics of the structure of debt and equity payments to project developers. For long-lived projects, a finance plan that matches the term of debt structure to the project’s life, makes both debt and equity payments subject to inflationary adjustments and deferred payments at the end of the payment period provides the best economic incentives for:
- customers to conserve water
- project operators to fulfill their contractual obligations
Plans that don’t incorporate these features will shift the economic burden of project costs to
future current customers relative to current future customers, erode the economic incentives for customers to conserve water long-term and dilute the economic cost of project operators defaulting on contractual obligations. Continue reading
How does 21% sound, which would be a 40% increase over the current 15% allocation declared by the Department of Water Resources? While “more is better”, Californians cannot rejoice. Due to the natural variability in precipitation, there is a 9% chance that the final SWP Allocation may be zero!
No, Hydrowonk is not using an Ouija board. Instead, these forecasts are based on a study of the historic record of SWP final allocations. This year’s version is slightly different than the model used last year to forecast SWP Final Allocations for 2014. Continue reading
In his article “The price Texas pays for Mexico’s water debt” recently published in the Texas Water Journal, the chairman of the Texas Water Development Board, Carlos Rubenstein, calls for active participation by the U.S. State Department, White House and Texas officials to have Mexico live up to its obligations under a 1944 Treaty between the United States and Mexico. The article is an excellent source for a concise history of the 1944 treaty and projects and summarizes the economic hardship suffered in the Rio Grande Valley when there are inadequate water supplies. It is less successful in identifying the water resource management problems facing the parties.
While Mexico may indeed have a “water debt problem”, it is not the one identified in the article. Texas’s interpretation of the 1944 treaty is not correct. The real challenge is how can the parties work together to create reliable water supplies in the face of highly variable hydrologic conditions. Continue reading