Water Purchase Agreement for Seawater Desalination Nearing Completion
August 09, 2012
At a special meeting of the Water Authority Board of Directors today, Water Authority staff announced that a proposed 30-year…
At a special meeting of the Water Authority Board of Directors today, Water Authority staff announced that a proposed 30-year Water Purchase Agreement with Poseidon Resources to purchase desalinated seawater will be released to the public later this month. The release will open a 60-day public review period, and the public will be invited to provide comments at two special public meetings and at regularly scheduled meetings of the Water Authority’s Board of Directors before the Board takes action on the agreement this fall.
The special public meetings will be held:
Thursday, Sept. 13, at 6:30 p.m. at the San Diego County Water Authority, 4677 Overland Ave., San Diego (Kearny Mesa area).
Thursday, Sept. 20, at 6:30 p.m. at the Carlsbad Senior Center, 799 Pine Ave., Carlsbad.
During the two-month public review period, the Water Authority’s 24 member agencies will be offered the opportunity to purchase a portion of the desalinated water from the Water Authority as their own local supply. Interested member agencies must notify the Water Authority of their intention to purchase desalinated water as local supply during the 60-day review period.
If approved and constructed, in 2020 the project would account for approximately 7 percent of the total projected regional supply. The Water Authority and its member agencies have been working to diversify the region’s water supply portfolio since the early ‘90s when up to 95 percent of the region’s water was imported and purchased from a single supplier: the Metropolitan Water District of Southern California. By pursuing seawater desalination and supporting member agencies’ local supply projects, by 2020 the Water Authority will reduce its reliance on imported water from MWD to about 30 percent, greatly increasing water reliability for the region.
“This project has been a long time coming,” said Water Authority’s Water Resources Director Ken Weinberg. “Poseidon has all of its approvals in place, our due diligence is nearing completion and we’re negotiating an agreement that assigns primary risk of the project to Poseidon at the lowest possible cost to the Water Authority. If the plant doesn’t produce the water, the Water Authority and ratepayers do not pay.”
Through the Water Purchase Agreement with Poseidon Resources, the Water Authority would bear no responsibility or liability for the seawater desalination plant. As the sole customer, the Water Authority would purchase water produced at the plant at a predefined price. The price would also cover costs for design and construction of a new 10-mile-long pipeline needed to deliver the water into the Water Authority’s existing aqueduct system. The price per acre-foot for the desalinated seawater, plus modifications to the Water Authority’s aqueduct required to incorporate this new supply, is still being finalized, but is estimated at between $2,000 to $2,300 per acre-foot.
Although more costly than the price paid for less reliable imported water supplies, the cost of desalination is cost-competitive with other new highly reliable water supply options being considered in San Diego County. Already approved by the California Coastal Commission and fully permitted, the desalination plant would be sited at the Encina Power Station in the city of Carlsbad.
If the Water Authority Board approves the Water Purchase Agreement, Poseidon would be authorized to finance the project and begin construction. The plant would produce up to 56,000 acre-feet of desalinated seawater per year, enough to serve 112,000 households of four people.
The Water Authority has been investigating seawater desalination as a new water supply since 1993. Since 2010, discussions have focused on contractual terms to transfer risk to the private sector for the design, construction and operation of the desalination plant and the design and construction of the new conveyance pipeline from the plant to the Water Authority’s system.
Under the Water Purchase Agreement, if the private firm fails to perform its responsibilities to finance, construct and operate the plant within schedule, it would be subject to damages. Water quality, operations and maintenance standards are also specified. At the end of the 30-year term, the Water Authority would have the option to purchase the plant for $1.