Poseidon’s Reliability Promise – Pay More Don’t Get More: Looking Back to 2015

Note: The Surf City Voice website was destroyed by hackers in December and is under reconstruction. This story was first published June 8, 2015

By John Earl
Surf City Voice

Will water ratepayers benefit if the Orange County Water District partners with Poseidon Resources Inc. to build a $1 billion ocean desalination plant in Huntington Beach?

The OCWD manages the Santa Ana River (groundwater) basin that provides over 70 percent of the water for central and northern Orange County.

For the past 19 months its board of directors has highballed the proposed project toward a contract with Poseidon that, so far, looks like a bad deal for ratepayers.

That deal would lock OCWD into buying 56,000 acre feet of desalinated water annually for the next 50 years, regardless of need.

And, at 3-10 times the price, it would replace an equal amount of water currently imported from the Metropolitan Water District of Southern California (MET) to help keep the basin at safe levels.

But most of OCWD’s producers (the 19 member agencies who pump water from the basin) will end up paying for Poseidon’s water, whether they want it or not.

One of those producer agencies, the Irvine Ranch Water District, thinks that would be unfair.

“Only those agencies that voluntarily take the project water should pay for the project,” wrote Paul Cook, IRWD’s general manager in a letter to OCWD directors last November.

Cook wanted OCWD to state the “tangible benefits producers will receive for subsidizing this project.”

A $76,000 study by Clean Energy Capital (CEC) commissioned a year ago by OCWD that was supposed to examine all the potential financial implications of an OCWD/Poseidon partnership turned out to be a ruse.

Cathy Green at Huntington Beach Coordinating Council

Cathy Green at Huntington Beach Coordinating Council

The CEC ignored the benefits issue entirely and so did the OCWD board.

Efforts by IRWD to get a public explanation of the supposed benefits of Poseidon’s desalination project continue to be unsuccessful.

The OCWD board also pushed aside other cost questions until a negotiated contract is presented to the board, a tactic that any “pre owned” car salesman would clearly recognize as in his favor.

So far, only platitudes scripted by Poseidon for its allies have described the supposed wonders that desalination will bring to Orange County.

Those allies have spoken out en mass at key voting points along the board’s project juggernaut.

They include politicians, developers, realtors, union workers, consultants, and UCI student business interns earning college credit.

OCWD chart shows current amount of water imported from the MET, 150,000 acre feet per year. The second chart, below, shows the imported water amount AFTER Poseidon’s water, 56,000 af per year, as included. There is no net gain. To see a larger version of this chart, click it once, then when it opens in a separate URL click it again.

Their message is that the desalination plant will provide a “reliable”, “locally controlled”, and “drought proof” source to create an additional 56,000 acre feet of drinking water each year for Orange County’s water-challenged residents.

No matter the extra cost, they say, because we must pay a “reliability premium” in order to insure Orange County’s water supply during periodic droughts.

As OCWD director Cathy Green put it last January, during a board vote that authorized a term sheet (pre contract) with Poseidon, “There is a price of reliably sustainable water. And I think that we all have to look at that and all of us have to decide what that price is for us.”

Under the latest term sheet that price will be up to about $1.8 billion in the first 15 years of the 50-year-contract versus about $700 million if OCWD bought the same amount of imported water.

This chart shows that OCWD's imported water purchases will decline by the amount of desalinated water it would buy from Poseidon (56,000 AF) for no net gain. (150,000 AF minus 56,000 AF. See above chart)

This chart shows that OCWD’s imported water purchases will decline by the amount of desalinated water it would buy from Poseidon (56,000 AF) for no net gain. (150,000 AF minus 56,000 AF. See above chart) To see a larger version of this chart click it once. When it opens in a new URL, click it again.

Speaking to the Huntington Beach Coordinating Council last March, Green made the questionable claim that by 2035 Orange County would need 90,000 acre feet of new water yearly to meet the needs of its growing population and that even Poseidon’s water wouldn’t be enough.

Pointing to charts prepared by OCWD staff, Green said, “Even if were to buy all of the 56,000 acre feet [as required by Poseidon], we would still need to buy imported water. So, we are always looking for sources that are reliable and sustainable that nobody can cut, [that] nobody can reduce how much we can use.”

But, mathematically speaking, the Poseidon project will not add a single drop of water to OCWD’s supply, nor will it add reliability to it.

That’s because Poseidon’s desalination plant must receive $475 per acre foot, or $400 million, in public subsidies for 15 years in order to keep its prices artificially lower (but still much higher than imported water) and to please its Wall Street investors.

Without the public subsidy the “privately funded” (Poseidon’s words) project will not be built, say Poseidon CEOs.

That subsidy, if it comes, would be paid for by all of southern California’s water ratepayers with money funneled through the MET’s Local Resources Program.

The purpose of the LRP is to encourage long-range development by local agencies of 779,000 acre-feet of water by recycling or groundwater recovery that offsets the need of the applicant agency to take imported water from the MET.

To that end, the LRP subsidy is money that comes with strings attached to make sure that the LRP’s purpose is fulfilled.

And that’s why Poseidon supporters, who claim that the Huntington Beach desalination plant will bring more water to OCWD and increase its water reliability, are wrong.

In detail, the LRP subsidies are awarded to water agencies for programs that “replace an existing demand or prevent a new demand on Metropolitan’s imported water supplies,” says the application form provided by the MET.

That goal is accomplished either by “direct replacement of potable water or increased regional groundwater production”, the application says.

(For more details of how LRP would work with the Poseidon project, read the sidebar)

Local water supplies subsidized by the LRP not only replace imported MET water but free it up for use by other water agencies in the MET empire, which stretches throughout Southern California, increasing the water reliability of those agencies, not the reliability of the agency receiving the subsidy.

“Replacing water available from MWD [MET] with higher cost water from the proposed ocean desalination project will not improve Orange County’s water supply reliability,” Cook wrote in his letter to the OCWD board, “but will instead improve the reliability of other agencies.”

Conceivably, the MET could change its LRP rules just for the Poseidon project, but that would make a mockery of the program and has never been considered openly by OCWD staff or directors.

The issue did come up at a recent closed meeting of OCWD producers, the Surf City Voice has learned.

According to an inside source, Cook asked why the MET would change its guidelines for the Poseidon project or why its other member agencies would support subsidizing the Poseidon project if the rest of the MET service area wouldn’t realize a water supply benefit.

With the MET’s subsidy guidelines apparently intact, one wonders why OCWD directors would want their ratepayers to pay three times as much to Poseidon without getting any additional water or reliability in return.

So far, OCWD officials have shown no interest in justifying their pet $1.8 billion desalination project with those details.

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