May 31, 2011

Dennis Cushman

Assistant General Manager

San Diego County Water Authority

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Latest Drought Over, But Challenges Remain

San Diego County is semi-arid region◦ Dry years more common than wet years

Supply reliability◦ Bay-Delta

◦ Colorado River

◦ Climate change

◦ Maintaining water use efficiency

Protecting ratepayers◦ MWD rate challenge

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Average Water Year Statewide Runoff

0%

25%

50%

75%

100%

125%

150%

175%

2006 2008 2010

173%

53%60% 65%

91%

145%

*Forecast as of May 1, 2011

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Bay-Delta

San Francisco Bay

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Bay-Delta Issues Need Resolution

Pumping restrictions to protect threatened species have cut deliveries

Restrictions mitigated this year

◦ Extremely high river flows

◦ Temporary judicial actions

No long-term plan in place for water reliability, ecosystem recovery

Delta smelt

Longfin smelt

Green sturgeon

Central Valley steelhead

Chinook salmon

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Colorado River Supplies

Drought 9 of last 11 years

Lake Mead elevation earlier this year: 1,082‟

◦ Lowest level since 1930s

Storage levels now rising

Several more wet years needed for recovery

Growing demand in Southwest on river‟s limited supply

Lake Mead – 2010

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Potential Impacts from Climate Change

More rain, less snow

◦ Decreases storage held as snowpack

Earlier snowmelt

◦ Runoff comes earlier than needed

Less weather predictability

Water Authority working with other utilities to study effects and impacts

Lake Oroville – April 2010

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Maintaining Water Use Efficiency

State mandate for 20 percent reduction in water use by 2020

Maintain recent gains in conservation

◦ Regional water use down about 20% since 2007

Efficiency needs to be social norm

Emphasis on outdoor efficiency

◦ Market transformation

Water efficient planting and rotating nozzle

The amount of money the Water Authority sent to the Metropolitan Water District last year:

$241,000,000 The amount of money at dispute in the Water

Authority‟s rate lawsuit vs. MWD (over 45 years):

$1,300,000,000 -$2,100,000,000

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Supply challenges key driver of MWD rates

MWD sales declining while rates are increasing

MWD‟s flawed rate structure overcharges the Water Authority for wheeling transfer supplies

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$0

$500

$1,000

$1,500

$2,000

$2,500

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

$/A

F

Actual Sales

Projected - Expected

MWD rates (actual/projected)

FS Tier 1-LRFP Forecast 2010-2020

LRFP Forecast with annual 6% rate increases

Acre

-fe

et

MWD‟s Projected Sales in 2020 are 24% Lower than

2000-2009 Average

-32%

+55%

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MWD misallocates supply costs to transportation rate categories in violation of state law

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$330 $330

$1,033

$1,637 $1,311

$2,105

Low High

Next 10 Years 35 Year Term 45 Year Term

MWD Overcharge Forecast(in millions)

State Water Project Facilities

Colorado River Aqueduct

Water Authority Facilities

MWD Water Facilities

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But they are unwilling to do so: ◦ “…to date, most of our board members have said „we‟re

not so sure about that.‟ And, most of our member agencies have said „No. Thanks, but no thanks, because we prefer this the way it is.‟”

◦ “Should people make those firm commitments going into the future? So far, the member agencies have opted not to. They prefer it the way it is.”

-- Excerpts of remarks by MWD General Manager Jeffrey Kightlinger, speaking at an August 10, 2010 public meeting in San Diego on MWD‟s draft 2010 Integrated Resources Plan (IRP).

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-$0.6

-$0.3

-$0.2

-$2.5

-$1.5

-$0.1

-$2.1

-$0.2

-$0.3

-$0.4

-$1.6

-$0.5

-$0.8

-$6.3

-$5.3

-$0.5

$31.0

$0.0

$0.0

-$0.4

-$0.3

-$1.4

-$0.4

-$0.5

-$2.9

-$2.0

City of Anaheim

City of Beverly Hills

City of Burbank

Calleguas MWD

Central Basin MWD

City of Compton

Eastern MWD

Foothill MWD

City of Fullerton

City of Glendale

Inland Empire Utilities Agency

Las Virgenes MWD

City of Long Beach

City of Los Angeles

MWD of Orange County

City of Pasadena

San Diego County Water Authority

City of San Fernando

City of San Marino

City of Santa Ana

City of Santa Monica

Three Valleys MWD

City of Torrance

Upper San Gabriel MWD

West Basin MWD

Western MWD

OverchargeUndercharge

Average MWD Water Purchases by Member Agency (2000-09)

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15 member agencies buy less than 2% of MWD‟s water and pay less

than 2% of MWD‟s bills

Average MWD Water Purchases by Member Agency (2000-09)

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20 member agencies buy less than 5% of MWD‟s water and pay less

than 5% of MWD‟s bills

Average MWD Water Purchases by Member Agency (2000-09)

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One member agency buys more than 25% of MWD‟s water and pays

more than 25% of MWD‟s bills

Case assigned to San Francisco Superior Court Judge Kramer

Estimate trial court decision in early 2012

MWD has proposed terminating funding agreements with Water Authority in response to lawsuit◦ Local supply agreements

◦ Local access to MWD conservation incentives

◦ Water Authority ratepayers contribute $22 million annually; MWD would return $0 to county

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Water Authority striving to provide reliable water supply for region‟s $186 billion economy, 1.3 million full-time jobs, and the quality of life for 3.1 million people

Water Authority needs a reliable supply from MWD, at an affordable and equitable cost

Water Authority needs a fiscally sustainable MWD

◦ With sound fiscal policies, stable revenues and that respects ratepayers

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