Lake Mead and the Arizona Intake Tower, July 1, 2014
Last July, Lake Mead dropped to its historic low elevation.
Water managers keep tabs on the reservoir conditions, so they were not blindsided. Solutions were already being sought. But I wonder, does crossing such a threshold spur a sense of urgency? Or do they already feel the pressure as the threshold approaches?
There is no doubt that California faces continued challenges as we enter into the fourth year of severe drought conditions. The pundits, however, disagree with the severity of the water supply crunch in the state. Last week, two prominent California water experts gave two different opinions on how severe the water crisis in California really is. Jay Famiglietti, professor of Earth System Science and Civil and Environmental Engineering at the University of California, Irvine made a dire prediction that California has one more year of water left in our reservoirs if drought conditions do not change. He recommends immediate water rationing across the state, urging everyone to pitch in and conserve water. In contrast, Jay Lund, Professor of Environmental and Civil Engineering at UC Davis sounded a more sanguine tone. While he agreed that our snowpack in particular was at alarmingly low levels, he did not agree that California will be at the end of its rope if conditions don’t get better in a year. He said, “It’s not the right impression that one more year of this and we’re toast. There’s quite a bit more left in groundwater – a bit less every year because we’re pumping, trying to make up for the drought.” Continue reading
This winter continues to be the tale of extreme weather patterns. In Boston, the City experienced its snowiest February ever, (Boston has weather records dating back to around the Civil War) and the grand total of snow this winter is less than 2 inches off of the all-time cumulative record set in the winter of 1995-1996. The subways and commuter trains in the City have run on modified schedules for weeks. Some above-ground tracks may not get fully cleared until the end of March. Economists estimate that the series of winter storms caused $2 billion in economic damages to the City of Boston alone. 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:
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