Water Rates and Availability

By Jim Hill

OCSD faces significantly increasing cost for water. What will happen to rates?

• Ground water. We are allowed 900 acre feet per year of ground water. This is our least expensive and most reliable source, however ground water rights has been the subject of extensive and expensive court battles over the last few years. The recently completed Santa Maria ground water litigation was settled in favor of OCSD and various cities (though still subject to appeals) at a cost to the District of tens of thousands of dollars. Some of our ground water has excessive selenium and some has excessive nitrates. Water that exceeds standards must be blended with other water to maintain acceptable quality. There is also potential for salt water intrusion into the aquifer if use becomes excessive.

• Lopez Lake. We are allowed 303 acre feet per year of Lopez water, depending on availability. This is "take or pay" meaning we have to pay whether we use it or not, and we are responsible for our proportionate cost (6%) of the Lopez dam and water treatment plant. Lopez water is good quality, but the potential for severe drought years makes reliability somewhat questionable. The cost of earthquake retrofits for the dam originally estimated at $5 million ended up at $25 million. The cost of treatment plant upgrades originally estimated at $5 million are now close to $30 million. OCSD is forced to pay these charges although we have no control over any of these projects or their costs. These are the responsibility of County Flood Control and Water Conservation District Zone 3. Increased costs at Lopez are the major component of increased water cost for the District.

• State Water Project. We are allowed 750 acre feet per year of State water, depending on availability. State water is also "take or pay" - we have to pay whether we use it or not. State water is our best quality source, however availability is not guaranteed and has actually been severely curtailed. Due to decreased Sierra snowpack and environmental concerns such as habitat for a fish called the Delta Smelt, our actual allotment for 2008 is only 35% of the 750 acre feet we would otherwise be entitled to, or about 260 acre feet.

While it might appear we could generally meet our needs from groundwater alone, there is the quality issue again, as well as the fact that in half of the last 12 years, total demand has exceeded our full ground water allotment.

Costs for Lopez water, our second most reliable source behind ground water and a good quality source, have risen drastically over the last few years, but rates have not gone up to cover all the increases. As a result, our water fund is now operating at a defecit. We are currently not setting aside any reserves to replace aging pumps, pipes and equipment that have been wearing out over many years during which rates remained constant.

What are our options?

One option would be to raise rates to cover costs plus a small reserve to cover replacement of aging equipment. This would not impact our water availability, but would significantly increase your residential water bill.

Another option is temporarily sell some water to other jurisdictions who do not have as many sources available. Such a sale would have to be for a sufficient time (mimimum 5 years) and a sufficient amount (probably at least 100 acre feet per year) that the revenue would be predictable and sufficient to be able to reduce the increase in our local rates. The more water sold under such an agreement, the less our rates would have to be raised, however at some point especially with the questionable availability of State water, our own needs could be impacted. That might result in water use restrictions or some form of rationing. Also the benefit would only last for the duration of the sale agreement.

A third option is some form of permanent sale of water rights. This would provide significantly more revenue to offset our increased costs, but we would permanently lose some of our access to water. One possibility for such a sale could be a revenue sharing agreement where Oceano might receive a portion of sales or transient occupancy tax generated in the other jurisdiction due to increased availability of water there going forward, while we could not receive such revenue under normal circumstances.

Public input is important as we decide how to address these issues to best benefit the community.