Posts

San Diego County Water Authority-Budget-Water Rates-Drought

Water Authority Board Adopts $1.7 Billion Two-Year Budget, Approves 2022 Water Rates

/in , /by

The San Diego County Water Authority’s Board of Directors today adopted a $1.7 billion budget for fiscal years 2022 and 2023 – a 0% change from the current two-year budget – and approved water rates and charges for 2022, following a public hearing.

The all-in rate, which is a blend of fixed and variable rates, will rise by 3.6% for treated water and 3.3% for untreated water in calendar year 2022, due to more rate increases by the Los Angeles-based Metropolitan Water District of Southern California, continued payments for past investments in supply reliability, and inflationary pressures on energy, chemicals, and construction materials. Actual water bills will vary based on customers’ water use, along with factors unique to their local retail water agencies.

“I’m proud of this budget and rates package in an era of unprecedented challenges,” said Water Authority Board Chair Gary Croucher. “We have contained costs while benefitting from strategic investments in water supply reliability that protect the region’s $253 billion economy and 3.3 million residents from statewide drought conditions. This achievement is only possible due to collaboration with our member agencies, strategic guidance from the Board, and the dedication of agency staff.”

More than 90% of the two-year budget is for buying and treating water or building and financing infrastructure. Seven percent of the budget for Fiscal Years 2022 and 2023 funds the Water Authority’s operating departments. The budget increase for those departments is 2%, or $1.9 million, compared to the current two-year budget.

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

Key initiatives during next two-year budget cycle

  • Long-term planning – The Water Authority’s Long-Range Financing Plan and the Water Facilities Master Plan will be prioritized. Both are critical documents for projecting the Water Authority’s financial future and providing the Board with flexibility. Phase B of the Regional Conveyance System Study will conclude, and the Board will determine whether to proceed. Another focus is developing water storage capacity in Lake Mead to provide additional drought resilience for San Diego County and other parts of the Colorado River Basin.
  • Controlling costs – The budget includes the elimination of seven staff positions, along with a reduction in outside services and minimizing travel. In addition, equipment replacement was evaluated for deferrals, minimizing the budget impact of day-to-day operations. As always, the budget is partly the function of water sales and water rates, which are both trending upward.
  • Capital improvements – The Water Authority’s Capital Improvement Program is the cornerstone of the agency’s efforts to ensure that regional water delivery and treatment systems continue to meet a variety of ever-changing demands. The agency will move forward on the highest-priority asset management projects, along with detailed seismic, hydraulic and cavitation analysis. Staff also will continue to enhance security systems for physical and cyber assets – a responsibility that grows as potential threats continue to expand.
  • Collaborating with member agencies – Water Authority staff in every department work closely with member agencies to support local efforts, from outreach and advocacy to budget and rate development – and those efforts will continue to be a priority. There are opportunities for collaboration both in joint projects and joint policy issues, such as advocating for local decision-making about drought investments and responses.
  • Communicating with stakeholders – Whether it be in the state Capitol or local chambers of commerce, the Water Authority will continue to share the region’s water story through a full range of engagement tools and creative tactics.

Although the Water Authority’s budget spans two fiscal years, the agency sets rates annually to manage changing conditions more effectively. The Water Authority developed its 2022 water rates in conjunction with an independent cost-of-service study to ensure rates and charges comply with state law, legal requirements, cost-of-service standards, and Board policies.

Drought-Safe, Supply Investments-Carlsbad Desalination Plant-drought

The San Diego region’s diversified water supply portfolio includes highly reliable, locally controlled and drought-proof supplies from the Claude “Bud” Lewis Carlsbad Desalination Plant. Photo: San Diego County Water Authority

Collaboration with member agencies

The Water Authority also worked closely with its member agencies to keep the proposed rates and charges at the low end of earlier projections.

In 2022, the Water Authority will charge its 24 member agencies an all-in rate of $1,523 per acre-foot for untreated water, or $49 more per acre-foot than they currently pay. Charges would be $1,833 per acre-foot for treated water, or $64 more per acre-foot than in 2021. (Note: An acre-foot is about 325,900 gallons, enough to serve the annual needs of 2.5 typical four-person households in San Diego County.)

The Water Authority’s overall rate increase is driven by multiple factors, including rising costs from its wholesale water provider, MWD. MWD increased its rates, including the amount it charges to transport the Water Authority’s lowest cost regional supply – high-priority, independent supplies from the Colorado River. Overall, MWD’s rates and charges for the Water Authority in 2022 will increase 3.9%.

Drought-Safe San Diego-San Vicente Reservoir-Drought-Water Supply Portfolio

The San Diego County Water Authority said June 21, that the region is protected from drought impacts this summer, and through 2045, despite continued hot and dry conditions. Photo: San Vicente Reservoir/San Diego County Water Authority

Strategic management

The water rates for calendar year 2022 include strategic withdrawals from the Rate Stabilization Fund. To reduce 2022 rate increases by approximately $65 per acre-foot, the Water Authority plans to draw $25 million from the agency’s Rate Stabilization Fund. The fund was created in 1990 to help avoid rate spikes, especially those driven by reduced water sales. The rate proposal also includes strategic management of the Water Authority debt portfolio resulting in $130 million in net present value savings from several refundings.

The 2022 rates ensure debt-coverage ratios that maintain the Water Authority’s strong credit ratings and minimize the cost of borrowing money for construction projects, an approach that saves ratepayers money over the long run. The Water Authority has senior lien credit ratings of AAA from Standard & Poor’s, AA+ from Fitch ratings and Aa2 from Moody’s.

For more information about the Water Authority’s 2022 and 2023 budget, and 2022 rates, go to pages 58 and 69 in the June Board packet.

Board Adopts $1.7 Billion Two-Year Budget, Approves 2022 Water Rates

/in , /by

June 24, 2021 – The San Diego County Water Authority’s Board of Directors today adopted a $1.7 billion budget for fiscal years 2022 and 2023 – a 0% change from the current two-year budget – and approved water rates and charges for 2022, following a public hearing.

The all-in rate, which is a blend of fixed and variable rates, will rise by 3.6% for treated water and 3.3% for untreated water in calendar year 2022, due to more rate increases by the Los Angeles-based Metropolitan Water District of Southern California, continued payments for past investments in supply reliability, and inflationary pressures on energy, chemicals, and construction materials. Actual water bills will vary based on customers’ water use, along with factors unique to their local retail water agencies.

Download File

Water Authority Recommends 0% Change in Next Two-Year Budget

/in , /by

May 27, 2021 – The San Diego County Water Authority’s general manager today recommended to the Board of Directors a $1.7 billion budget for fiscal years 2022 and 2023 – a 0% change from the current two-year budget – due to the agency’s continuing commitment to cost control.

Download File

Ratepayers Save $48 Million in Water Authority Bond Refundings

/in , /by

April 29, 2021 – The San Diego County Water Authority this month completed a series of bond refundings that will save ratepayers $48 million – the latest in a long series of debt refinancing moves that help reduce the cost of critical water infrastructure investments.

The savings from the refinancing of Series 2021S-1 (Green Bonds) and Series 2021B (Green Bonds) were supported by continued strong credit ratings issued in March. Green bonds are designated to encourage sustainability and to support clean water, sustainable water management and other environmental projects.

Download File
Desalination plant-credit ratings-water supply

Credit Agencies Affirm Water Authority’s Strong Ratings Despite Headwinds

/in , /by

All three major rating agencies – S&P, Moody’s, and Fitch – have affirmed the San Diego County Water Authority’s strong credit ratings, which will help the Water Authority optimize its debt portfolio and minimize the cost of financing important water reliability projects.

The reports cited the Water Authority’s strategic management, its conservative approach to water sales projections, and the benefits of the Water Authority’s rate case litigation that recently resulted in $44.4 million being refunded to local retail water agencies – among many other factors.

Significant challenges

However, 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 across San Diego County. If the two North County agencies leave per their plans, Water Authority analysis shows that the other 22 member agencies will have to pay $16 million to $46 million more per year to cover the cost of the departing agencies.

Moody’s said detachment could lead to a credit downgrade, which would increase borrowing costs for critical water reliability projects. S&P Global 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.”

Solid financial position

Water Authority General Manager Sandra L. Kerl said, “The Water Authority maintains a solid financial position even in these difficult times, and the credit ratings reflect that. But the challenges are real as well, and they should unify the region to ensure that we continue to benefit from the safe, reliable water supplies we’ve invested in together for the past 30 years.”

In affirming their credit ratings, the services cited the Water Authority’s strong financial leadership, including prudent strategies to manage issues related to COVID-19, its success diversifying water supply sources, its commitment to infrastructure maintenance, and its financial reserves for managing contingencies, among other factors.

  • Fitch Ratings affirmed its AA+ rating and gave a stable outlook on March 15. Fitch noted the Water Authority’s “operating costs are low”  and credited the Water Authority for “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.
  • Moody’s Investors Service affirmed its Aa2 rating and stable outlook March 14. Moody’s said, “the stable outlook reflects our expectation that the Authority’s satisfactory operating performance will continue, supported by strong management practices in the face of challenges associated with variable water supplies, rising costs, and the coronavirus pandemic.” Moody’s added: “Liquidity, including a rate stabilization fund, remains sound serving to insulate the Authority from risks associated with variable water supplies, including California’s (Aa2 stable) current drought conditions, as well as unanticipated events such as the coronavirus pandemic.”
  • S&P affirmed its AAA rating on March 17 and issued a negative outlook based on “heightened business risks associated with potential projected declines in water sales.” On the plus side, S&P cited the Water Authority’s demonstrated ability to navigate highly variable demands and weather cycles. The agency also said, “management is taking important steps” to balance fixed and variable costs, and it praised the Water Authority’s “robust infrastructure maintenance and operational policies.”

Risks include detachment

All three agencies addressed risks, such as additional local supplies that reduce Water Authority sales and member agency detachment. As proposed by Fallbrook and Rainbow, the detachments would allow those agencies to avoid paying for water supplies and infrastructure that have been developed in collaboration with those agencies and are currently being used by those agencies to meet their customers’ needs. Abandoning those cost obligations would force other ratepayers countywide to cover their portion of the bills already incurred for decades of investments in supply reliability.

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.

For more information about the Water Authority’s finances go to: www.sdcwa.org/finance-investor-relations. Information about detachment is at https://www.sdcwa.org/member-agencies/lafco-reorganization/.

Opinion: Non-Revenue Water – An Opportunity for Water Utilities, Now More than Ever

/in , , /by /Water Finance & Managementby Travis Smith

It is no secret that the COVID-19 pandemic has impacted the water industry. Revenue shortfalls from a decline in commercial and industrial water use and some residential customers struggling to pay bills are affecting utilities across the country. The service must go on, but in some cases the revenue lags. Conservative estimates from the National Association of Clean Water Agencies suggest the industry as a whole is expected to lose at least $12.5 billion due to the coronavirus when all is said and done.

Full Story

Solar Project Saves Energy, Costs for Vallecitos Water District

/in , , /by /Water News Network

The Vallecitos Water District is pursuing greater use of renewable resources, increasing capacity to the electrical grid, and reducing long term operational costs with an innovative solar power project.

Full Story

FPUD to Refinance Debt for Wastewater Treatment Plant

/in , , /by /Fallbrook Village Newsby Joe Naiman

The Fallbrook Public Utility District will be refinancing its debt for the wastewater treatment plant.

A 5-0 FPUD board vote, Aug. 24, approved the development of a financing plan and debt documents. FPUD expects to reduce its payments by $1.1 million over a 15-year period, or approximately $73,000 annually.

“With the current low interest rate environment, we had the opportunity to save a substantial amount of money,” Jack Bebee, FPUD general manager, said.

Full Story

San Diego County Water Authority Priced into a Market Eager for California Paper

/in , , /by /The Bond Buyerby Keeley Webster Quoted: San Diego County Water Authority

The San Diego County Water Authority’s decision to do a forward delivery on one of two series for a $400 million refunding paid off with the water wholesaler realizing $67.4 million in savings.

The Water Authority decided to explore what has become a more frequent option used by issuers since tax-exempt advance refundings were eliminated by the 2017 federal tax bill with the aim of realizing greater savings for ratepayers, said Lisa Marie Harris, the water authority’s finance director.

Co-lead managers B of A Securities and Loop Capital Markets priced Wednesday a $283.5 million series and $117.7 million series of water revenue refunding bonds. Orrick Herrington & Sutcliffe LLP is bond counsel. Montague DeRose and Associates LLC and Acacia Financial Group are co-municipal advisors.

Full Story

Unpaid Power Bills Continue to Plague District

/in , /by /Imperial Valley Press (El Centro, Calif.)by Michael Maresh

The Imperial Irrigation’s financial picture after the first six months was not a rosy one, and the district expects it to get worse as COVID-19 numbers continue to increase in the county.

When IID Assistant General Manager Sergio Quiroz presented the IID Board of Directors Tuesday with the district’s financial update, he pointed out the figures include January through March, before COVID-19 had fully impacted the district.