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Gary Croucher-Board Chair-San Diego County Water Authority-Primary

2021: A Year of Accomplishments for the Water Authority

Looking back over all that we have accomplished in 2021 makes me thankful for the thousands of hard-working professionals who serve our region by ensuring safe, reliable water supplies each and every day.

I’m especially proud of the team at the San Diego County Water Authority – from my fellow Board members to our dedicated staff to our member agency partners – that works on countless complex issues from pipeline relinings to bond refundings. Everything they do is designed to support the long-term health of our regional water delivery system at an affordable cost, even in the face of ongoing challenges like the pandemic and supply chain issues.

This year yielded ample results from our collective efforts. Over the past 12 months, we:

  • Returned more than $80 million directly to our member agencies from rate case litigation that also prevented hundreds of millions of dollars of additional overcharges that would have ultimately shown up on every water bill in the region.
  • Met the region’s need for water as drought worsened across the West while promoting wise use of our most precious natural resource.
  • Crafted a positive, productive relationship with the Metropolitan Water District of Southern California to collaboratively work on drought response and other pressing issues for the benefit of the entire state.
  • Earned regional and national recognition for our work on climate adaptation, outreach and education, conservation, engineering, finance, and other efforts.
  • Adopted a hold-the-line budget with a 0% percent increase.
  • Secured $18 million in state funds to launch development of the San Vicente Energy Storage Facility, which could play a major role in preventing blackouts, harnessing the full potential of renewable energy, and generating revenue to offset water system costs.

There’s a lot more to our story that you can read in our FY2021 Annual Report. For now, I’ll wish you a wonderful holiday season and look forward to seeing you in 2022.

Happy holidays!

Gary Croucher-Board Chair-San Diego County Water Authority-Primary

$35.9 Million More Returned to Local Water Agencies, Drought Plan Activated

I am so pleased to announce that the San Diego County Water Authority has distributed $35.9 million more to our 24 member agencies across the region as another piece of our successful rate case litigation. The current payments, combined with another set last February, add up to more than $80 million in rate-case payments we secured on behalf of our member agencies in 2021 as part of our ongoing effort to advocate for the San Diego region.

While the litigation was necessary to protect San Diego County ratepayers, we are looking forward and embracing the new spirit of collaboration at MWD under General Manager Adel Hagekhalil and Board Chair Gloria Gray as we focus on the challenges ahead with a united front. The Water Authority and MWD continue to seek resolution outside of court on remaining issues, and we are building a partnership to address challenging issues in Southern California such as water supply reliability, conservation, affordability, and climate change.

Current drought

One such challenge is the current drought. The Water Authority’s Board of Directors unanimously voted to activate Level 1 – Voluntary Conservation of our Water Shortage Contingency Plan in support of Governor Gavin Newsom’s efforts to sustain California after two record-dry years. This is the third time this century the plan has been activated due to recurring drought. The Governor extended his drought emergency declaration last month to cover the entire state and directed water suppliers to implement Water Shortage Contingency Plans, which are responsive to local supply-demand conditions.

As I have mentioned before, the San Diego region continues to have reliable water supplies due to decades of conservation efforts and ratepayer investments. But San Diegans have always stepped up when duty calls. I encourage residents and businesses to conserve water, avoid water waste, and take advantage of rebates to improve water-use efficiency indoors and outdoors. We offer numerous tools to make the most of every drop at www.watersmartsd.org.

Thank you for your continued investments in supply reliability and commitment to water efficiency that have helped to ensure we have enough water to meet the region’s needs both now and for the future, even in the face of climate change. I will continue to keep you updated on the latest drought news in the weeks and months ahead.

Gary Croucher-Board Chair-San Diego County Water Authority-Primary

A Model for Dealing with Climate Change

I’m so gratified to report that due to your efforts, today’s New York Times features a lengthy story recognizing the benefits of the San Diego County water reliability strategy – an approach that aligns with Gov. Newsom’s Water Resilience Portfolio.

The article addresses our region’s role in the nation’s largest ag-to-urban water conservation project, along with the conservation ethic embraced by homes and businesses across the region, and current investments in potable water reuse, which is the next major source of supply for the region.

The Times cited the Public Policy Institute of California – a leading think tank – commending the San Diego region’s efforts. And the story said our collective “try-everything approach to getting water has emerged as a model for cities — including Denver and Albuquerque — where leaders are dealing with one of climate change’s most dire effects.” Also today, the Southern California News Group published an editorial that showcased local investments as a model.

While we celebrate these recognitions, we remain acutely aware of the severe and worsening drought conditions across the West – and how important it is for the San Diego County to continue being a leader in statewide drought defenses. That’s why our Board next week will consider activating our drought response plan. This action supports the governor’s request that local water suppliers implement plans responsive to local conditions, and his extension of the drought emergency declaration to San Diego County.

Gary Croucher-Board Chair-San Diego County Water Authority-Primary

Water Authority’s Ratepayer Protection Case Secures Additional $36 Million Recovery

I am pleased to announce a decision by the Metropolitan Water District of Southern California’s Board of Directors to pay the San Diego County Water Authority damages and statutory interest for illegal water charges from 2015-2017, totaling about $36 million. MWD’s vote followed a California Court of Appeal decision upholding earlier rulings in favor of San Diego.

This payment will bring the Water Authority’s cash recovery on behalf of San Diego County water agencies and ratepayers to more than $80 million. An additional award of attorneys’ fees to the Water Authority, still on appeal, is expected to bring the cash recovery to almost $94 million for rates and charges set by the Los Angeles-based wholesaler over an 8-year period from 2010-2017. Adding in avoided rate increases when MWD stopped imposing the illegal rate, brings the total savings for San Diego County ratepayers to almost $140 million over the 10-year period at issue in the cases.

Collaboration with MWD

I want to thank General Manager Adel Hagekhalil, Chairwoman Gloria Gray and the entire MWD Board for taking this important step toward a more collaborative future. This provides exactly the kind of catalyst we need to resolve the remaining issues between our two agencies.

I also want to acknowledge the collaboration with our peers at MWD over the past several months, working together on the challenges we face including the severe drought conditions across California and how to maintain an affordable and reliable water supply for all of our collective member agencies and ratepayers.

The recovery aligns with the Water Authority’s focus on taking all actions necessary to protect our ratepayers and ensure affordable water rates for future generations. Litigation is never welcome or easy and it wasn’t in this case. But our Board felt there was too much at stake and that an independent tribunal was needed to address and resolve our respective concerns.

Ratepayer protection litigation

Announcement of these ratepayer benefits follows the Water Authority’s distribution seven months ago of a $44 million recovery from MWD for damages and interest in earlier 2011-2014 cases. The money – refunded to the Water Authority’s member agencies in proportion to their overpayments – also resulted from the Water Authority’s ratepayer protection litigation in state Superior Court and positioned its member agencies to reduce future regional water rate increases.

Importantly, the court rulings and guidance are also expected to help avoid future potential taxation of San Diego County ratepayers and minimize future disputes over MWD’s rates.

In February 2020, after the Court of Appeal ruled MWD’s “rate structure integrity” clause unconstitutional, MWD changed its rules to allow Water Authority member agencies to apply for benefits. As a result, the Water Authority’s Board of Directors voted to dismiss these issues from the litigation. Since then, the Water Authority has assisted its member agencies in obtaining nearly $500 million in MWD funding agreements including the City of San Diego’s Pure Water project, which is funded by rates paid by all MWD member agencies including the Water Authority.

The Water Authority is currently working collaboratively with MWD and its member agencies across Southern California to update MWD’s long-term water resource and financial plans. MWD’s Integrated Resources Plan, known as the IRP, will be supplemented by a new “One Water” plan intended to represent the agency’s roadmap for the future and focusing on enhanced collaboration with its member agencies.

Gary Croucher-Board Chair-San Diego County Water Authority-Primary

Help Protect San Diego County Through Voluntary Water-Saving Efforts

This has been a tough week in the water world. On Monday, the U.S. Bureau of Reclamation announced the first formal shortages on the Colorado River for 2022. That will directly impact Arizona, Nevada and Mexico next year. On Tuesday, the Metropolitan Water District of Southern California’s Board of Directors increased its drought alert level – another signal of the serious situation faced by residents across the western U.S.

San Diego region prepared

Declining water availability on the Colorado River and worsening drought conditions statewide underscore the importance of collective actions to ensure reliable water supplies not only for today, but for next year and for future generations. Thankfully, the San Diego region has prepared for dry periods and our water supplies will continue to sustain our economy and quality of life.

Water management solutions

At the same time, we are working with our partners at the regional, state, and federal levels to advance water management solutions for the Southwest because we realize that we are all in this together.

The quickest way to help defeat drought is to eliminate water waste at homes and businesses, and we stand with MWD and Governor Newsom in supporting voluntary water-use efficiencies. There are several ways to do that: checking irrigation systems for leaks and repairing them quickly; keeping chilled water in the fridge instead of running the tap to let it cool; keeping showers to 5 minutes or fewer; applying mulch around plants to reduce evaporation.

With those steps and others, we will emerge from this drought stronger together. Thank you for joining with us in this effort. For more information, resources, rebates and tips, go to www.watersmartsd.org.

Gary Croucher-Board Chair-San Diego County Water Authority-Primary

Local Renewable Energy Project Gets Big Boost

I’m so pleased to report that a large-scale renewable energy project proposed jointly by the City of San Diego and the San Diego County Water Authority received $18 million in the state budget signed this month by Gov. Gavin Newsom. That money will advance the San Vicente Energy Storage Facility through initial design, environmental reviews, and the federal licensing process – a huge boost for a project with a huge upside for the region.

This is one of the most promising pumped energy storage solutions in California, and it would be a major asset to help avoid rolling blackouts through on-demand energy production while helping to meet state climate goals. It also could mitigate costs for water ratepayers across the San Diego region by generating additional revenue to help offset the cost of water purchases, storage, and treatment. The City and the Water Authority are developing the project together, just like they did to raise the height of the city-owned San Vicente Dam 117 feet in the 2010s.

San Vicente Energy Storage Facility project

Upon completion, the San Vicente energy project would provide up to 500 megawatts of long-duration stored energy, which will assist in meeting peak electrical demand periods throughout Southern California and help meet the goals of Senate Bill 100, which requires 60% renewable energy by 2030 and 100% zero-carbon energy resources statewide by 2045. The project will provide enough energy for about 135,000 households when operating.

We owe a debt of gratitude to Gov. Gavin Newsom and Senate President pro Tempore Toni G. Atkins for ensuring funding for this critical infrastructure project, which will create more than 1,000 construction-related jobs in addition to its other benefits.

With state funding in place, the Water Authority and the City are preparing to launch federal and state environmental reviews, seek a project license from the Federal Energy Regulatory Commission, and issue a Request for Proposals for a full-service private partner to help develop the project. Those complex components are expected to take at least four years, with construction completion forecast for 2030.

Pumped energy storage projects are designed to store excess renewable energy from solar and wind during the day, and then discharge that energy when energy use increases in the evening and renewable energy is not available.

The San Vicente project would create a small upper reservoir above the existing San Vicente Reservoir in Lakeside, along with a tunnel system and an underground powerhouse to connect the two reservoirs. The powerhouse would contain four reversible pump turbines.

During off-peak periods – when power is inexpensive and renewable supplies from wind and solar facilities exceed demand – turbines would pump water to the upper reservoir where it would act as a battery of stored potential energy. During high energy use, the system would discharge water from the upper reservoir downhill through the turbines, producing energy. The exchange between the two reservoirs would not consume water.

For more details about the San Vicente Energy Storage Facility go to: www.sdcwa.org/projects/san-vicente-pumping-facilities/

Gary Croucher-Board Chair-San Diego County Water Authority-Primary

San Diego Region is Drought-Safe This Summer

Statewide drought conditions are highlighting the value of regionally and locally controlled water supplies in San Diego County, where the Water Authority announced June 21 that the region is protected from drought impacts this summer, and through 2045, despite continued hot and dry conditions. No shortages or regional water-use mandates are in the forecast – the result of three decades of strategic investments that create an aquatic safety net for San Diego County’s $253 billion economy and our quality of life.

The region’s diversified water supply portfolio includes highly reliable and locally controlled supplies, including desalinated seawater from the Claude “Bud” Lewis Carlsbad Desalination Plant. It also includes high-priority, low-cost, conserved water from the Quantification Settlement Agreement, the nation’s largest conservation-and-transfer agreement. The combination offers significant protection against droughts and other emergencies even during multiple dry years.

San Diego region is “drought-safe” thanks to water-smart practices

I offer my sincere thanks to all San Diegans for everything you have done to make sure that we have enough water to meet the region’s needs now and for decades into the future. You have invested through your water bills and your water-smart practices, and those efforts are paying off in tangible ways.

At the same time, it’s important that we all continue embracing water-use efficiency strategies that have become part of our regional ethic. Simple but important steps include turning off the faucet while brushing teeth, fixing irrigation system leaks, and using hoses with automatic shut-off nozzles.

Thanks again for all you do, and remember to stay water-smart this summer!

Gary Croucher-Board Chair-San Diego County Water Authority-Primary

Controlling the Budget and Water Rates in a Challenging Era

As we head into summer, we look forward to the continued retreat of COVID-19 and a full return to baseball games, barbeques, and graduation celebrations.

We also take a moment to remember that those things we cherish about San Diego County are all based on a reliable supply of water. It is the foundation of everything we do in our semi-arid climate. That’s why I’m so pleased to report that we have reliable supplies through at least 2045, even during multiple dry years like this one. That assurance was part of the 2020 Urban Water Management Plan that the Water Authority Board of Directors recently approved.

Water supply reliability

The Board is also considering the proposed 2022 water rates, along with the budget for fiscal years 2022 and 2023 – a challenging task to say the least. The proposed two-year budget is $1.7 billion, a 0% change from the current two-year budget due to our continuing commitment to cost control. As usual, more than 90% of the recommended budget is for buying and treating water or building and financing infrastructure. This reflects our long-term strategy to invest in supply reliability to meet current and future needs of the San Diego region – a strategy that is paying significant dividends during the current drought hitting most of California.

Water Authority staff also proposed increasing rates and charges for member agencies by 3.6% for treated water and 3.3% for untreated water in calendar year 2022, attributable to more rate increases by the Metropolitan Water District, continued payments for past investments in supply reliability, and inflationary pressures on energy, chemicals, and construction materials.

Rigorous review of budget and water rates

Each budget and rates package undergoes a rigorous review process, as we steward ratepayer funds to ensure continued water supply reliability in support of our $253 billion economy and quality of life. This year’s budget process started in fall 2020 with internal analyses, and it continued with meetings with our retail member agencies over the past several months. The process continued this week with the Board holding a third budget workshop. We expect to vote on the budget and rates package, following any revisions, on June 24.

A final note: I thought you might be interested in this letter that I recently sent to Gov. Newsom to share my appreciation for his leadership navigating the complexities of the current drought and outlining some of our key policy principles. It’s gratifying that the governor has avoided the kind of one-size-fits-all regulations we faced in the last drought – and I encouraged him to stay the course with regards to letting local leaders determine the appropriate response for their areas.

Urban Water Management Plan-2020-San Diego County Water Authority-San Vicente Dam

The San Diego County Water Authority Board of Directors May 27 approved the Water Authority’s 2020 Urban Water Management Plan highlighting a “water portfolio approach” that ensures reliable water supplies for the region through the 2045 planning horizon – even during multiple dry years. Photo: San Diego County Water Authority

Gary Croucher-Board Chair-San Diego County Water Authority-Primary

Investments Protect San Diego Region from Drought

It has been a very busy few weeks in the water world, with the governor declaring a drought emergency in two Northern California counties and increased discussions across the West about how to manage water through a very dry year.

While the challenges are real in some parts of the state, I applaud Governor Newsom for taking a targeted, flexible, and iterative approach to drought management. This approach provides support for individual regions that are suffering from drought while also recognizing regions like San Diego County that have sufficient water supplies due to three decades of investments in supply reliability.

Water Portfolio Strategy

The governor’s Water Portfolio Strategy aligns with our region’s long-term investments in a diversified water portfolio, desalinated seawater, conserved water from Imperial County, local water-use efficiency measures, member agency recycled water and local supply projects, and increased water storage. It’s especially important to highlight the efforts of our ratepayers, who have cut per capita water use by nearly half since 1990. Because of those actions and others, our residents have enough water for 2021 and future dry years.

In addition, the innovative and resilient water supply portfolio created by the Water Authority and its 24 member agencies puts our region in a unique position to provide solutions that can help California weather this drought and future droughts – for instance, by storing water in Lake Mead. We look forward to working with the governor and his staff to collaborate on projects and programs where we can use our assets and experience to help areas that are hit hard by drought in the face of a changing climate.

Finally, I invite you to read my latest commentary in The San Diego Union-Tribune that addresses many of the issues being faced statewide and how that impacts San Diego County.

I hope you also take a moment to appreciate the cartoon in the U-T by Steve Breen, which perfectly captures our investments over the past three decades.

Steve Breen Drought cartoon-prepared-drought

Gary Croucher-Board Chair-San Diego County Water Authority-Primary

Water Authority Credit Remains Strong as Risks Emerge

All three major rating agencies affirmed the San Diego County Water Authority’s strong credit ratings, which will help us minimize the cost of financing important water reliability projects.

It is particularly gratifying that the reports cited the Water Authority’s strategic management, our conservative approach to water sales projections, and the benefits of rate case litigation that recently resulted in $44.4 million being refunded to local retail water agencies, among many other factors. In affirming their credit ratings, the services also noted the Water Authority’s strong financial leadership (including prudent strategies to manage issues related to COVID-19), decades of success diversifying water supply sources, our commitment to infrastructure maintenance, and our financial reserves for managing contingencies.

Significant investments in supply diversification

Just one example: Fitch Ratings said that the Water Authority’s “operating costs are low” and that the Water Authority’s “significant investments in supply diversification (that) have allowed SDCWA to continue to meet water demands in its service area.” Fitch also accounted for the Water Authority’s current hiring freeze, spending cuts and deferral of $30 million in planned capital spending to proactively manage finances during the pandemic.

At the same time, rating agencies also noted significant challenges ahead, including efforts by Fallbrook Public Utility District and the Rainbow Municipal Water District to “detach” from the Water Authority – a move that could negatively impact ratepayers countywide. If the two North County agencies leave per their plans, Water Authority analysis shows that the other 22 member agencies – who serve about 3.2 million residents – will have to pay $16 million to $46 million more per year to cover the cost of the departing agencies.

Detachment and credit ratings

Moody’s said detachment could lead to a credit downgrade, which would increase borrowing costs for critical water reliability projects. S&P Global affirmed its AAA rating for the Water Authority. However, it issued a negative outlook for the agency and called detachment uncertainty “an additional credit stressor” – “especially if an approved detachment sets a precedent if members can easily detach from the authority.” S&P added that, “this would be further exacerbated if the two members are not required to pay for their portion of the associated debt and infrastructure costs that the authority has undertaken to provide reliable water sources.”

In May 2020, the Water Authority’s Board of Directors voted to oppose detachment unless four conditions can be met related to protecting Fallbrook and Rainbow ratepayers, avoiding negative impacts for other member agencies, protecting the Sacramento-San Joaquin Bay-Delta, and maintaining the Water Authority’s voting rights at MWD. The issue is under review by the San Diego Local Agency Formation Commission, known as LAFCO. The LAFCO process, which is designed to provide for an impartial analysis of these issues, will allow the Water Authority and all other affected parties to determine if these conditions are satisfied. If not, the Water Authority will oppose detachment.