Financing the Delta Plan - Agriculture and the Friant Conundrum

In this post I estimated that, if the financing of a large Delta conveyance facility were spread proportionally, it could cost all South of Delta export users $143 per acre-foot – above current costs.  There has been plenty of speculation about whether the Westlands Water District and the Kern County Water Agency will be willing to pay this cost.  But Westlands and Kern may not be the largest challenge to be faced in securing financing for a Delta Plan from agricultural water users. 

The group of water users known as the Exchange Contractors (aka “the Exchangers”) receives 800,000 acre-feet of water from the Delta each year.  These districts claim senior rights and receive Delta water in “exchange” for their historic supply from the San Joaquin River.  (They gave up the San Joaquin supply when Friant Dam was built.)  The Exchangers have had a good deal for the past half-century.  At their insistence, the Friant water users – who today use the bulk of the water from the San Joaquin River – pay the cost of delivering the Exchangers’ water from the Delta.  Devoted water wonks know that the Exchangers expect the cost of any new facility related to the delivery of their Delta supply to be paid by Friant. 

Simply put, the Exchangers assert that Friant must pay all costs associated with the “exchange” supply from the Delta, including a share of any conveyance facility, under the terms of the original deal allowing Friant to use San Joaquin River water.  You with me?  (By the way, starting at minute 38 in this video, you can hear the financing discussion at the October 2010 MWD Special Committee on Bay-Delta meeting – including a discussion of Friant’s contribution.)

If the Exchangers’ proportional share of the Delta facility proposed by Governor Schwarzenegger were spread over the average annual deliveries of Class 1 and Class 2 Friant water – 1.2 million acre-feet per year -- it would cost an additional $95 per acre-foot.  That cost would be seven times their current contract water rate.  (Friant water districts hold 800,000 acre-feet of the more reliable Class 1 San Joaquin River water.  Most Class 1 Friant contractors pay the Bureau a water rate lower than $14 per acre-foot.  Class 2 contractors pay half of that rate for their less reliable supplies.)  

In my second financing scenario, if MWD agreed to pay 50 percent of a Delta facility and all other South of Delta water users contributed proportionally, the Friant rate increase would be $61 per acre-foot.  (In this scenario, the additional cost would be about $92 per acre-foot for other agricultural water users South of the Delta, like Kern and Westlands.)

Thus, these two conceptual scenarios suggest potential rate increases for Friant of $61 to $95 per acre-foot to help finance the facility included in the Schwarzenegger plan and cost increases for Westlands and Kern of $92 to $143 per acre-foot.  Will Friant water users be willing to bear these costs for water delivered to others?  Will the Exchangers be willing to pay a share?  Will Friant and the Exchangers propose to shift those costs to other water users? 

I won’t predict the answers to these high stakes questions. 

These two conceptual proposals outline some options for financing the conveyance portion of a Delta Plan.  To date, the discussion about Delta financing has largely been filled with generalities, whispers and hopes.  It’s time to pull that discussion into the light of day – or at least into the windowless meeting room of the Delta Stewardship Council. 

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