When was the last time that you heard a water district in California complaining that in the future, they will have too much water supply? Remarkably, that’s the future that the Metropolitan Water District of Southern California (MWD) outlined at their October 2019 Board of Directors’ retreat.
On the one hand, this is great news, as it indicates that Southern California can invest in local and regional water supply projects to sustain the economy while significantly reducing diversions from the Bay-Delta. After all, state law requires reducing reliance on the Delta (Water Code § 85021), and the science is clear that we need to reduce water diversions and increase flows into and through the Delta if we’re going to keep native fish species from going extinct and maintain water quality for farms and communities in the Delta. As the Newsom Administration advances regional water resilience in the face of climate change, MWD’s materials show that Southern California can thrive even with less water from the Delta. Indeed, even in the present day, MWD's latest projections show that MWD's water supplies will equal demands if the State Water Project allocation is 35% in 2020 (by comparison, DWR's 2019 report estimates that the long term average State Water Project allocation is 62%).
However, the bad news is that MWD sees this as a problem since their business model is based on selling imported water, and MWD’s apparent “solution” to their problem—cutting funding for water conservation, cutting funding for local water supply projects, and increasing fixed charges to create disincentives for cities to invest in local and regional water supply projects—would be terrible public policy for the State of California. Even worse, MWD seems to want to cut funding for local water supply projects while also investing billions of dollars of ratepayer funding in environmentally destructive projects like Sites Reservoir, lobbying Congress to raise Shasta Dam in violation of State law, and lobbying to weaken environmental protections for endangered species in the Bay-Delta in order to increase diversions from the Delta.
The Good News
The report (here) and powerpoint presentation (here) provided at MWD’s recent Board of Directors retreat explain that even as the population of Southern California has grown over the past several decades, demand for imported water has remained flat or declined.
What’s more, the report and powerpoint explain that Southern California has increased water use efficiency, anticipates significant new investments in local water supply projects, and estimates slowing population growth in the region. As a result, by 2040, if future local water supply projects in the region are fully implemented, demand for imported water in an average year would be less than 1.2 million acre feet per year—less than 60% of what MWD projected in their 2015 Integrated Resources Plan.
NRDC’s 2017 Mismatched report identified many of the same trends and conclusions, most notably that MWD was significantly overestimating demand for imported water and underestimating potential local water supply projects as compared to their member agencies. This graphic from our Mismatched report estimated that in 2040, if all of the local water supply projects in member agencies’ plans were implemented, total demand for imported water from MWD would decline to 1.2 million acre feet in an average year, nearly identical to MWD’s estimate above.
The fact that MWD estimates that future demand for imported water can be reduced so low is great news for fish and wildlife in the Bay-Delta, and for the communities and jobs, from Stockton to Fort Bragg, that depend on a healthy Bay-Delta, thriving fisheries, and healthy rivers and water quality. The State Water Board has estimated that updating protections in the Bay-Delta would require reductions in water diversions in many years, and these graphics indicate that Southern California can meet this challenge by investing in local and regional water supply projects. This potential future is driven by investments in water use efficiency and local water supply projects, highlighted by the efforts by Los Angeles and San Diego, both of which plan to dramatically reduce purchases of imported water from MWD. This is a very good thing. As the Los Angeles Times editorial board recently wrote,
"Some of the water that the Trump administration has ordered to be diverted from the rivers would flow to Southern California faucets as well as Central Valley nut orchards. But surely Los Angeles did not sign up for this—for policies that drain rivers, degrade the natural environment and leave cities in other parts of the state to choke on toxic algae and intruding saltwater. Our survival does not require snuffing out salmon, Stocktonians or our neighbors in other parts of the state."
Los Angeles, San Diego, and other communities are working to reduce demand for imported water, which also creates local jobs and more sustainable and drought-resistant water supplies. That’s the good news.
The Bad News
The meeting materials make clear that MWD sees reduced demand for imported water as a threat and seems determined to throw up roadblocks to communities doing so, including:
- Cutting funding for water conservation and local water supply projects: “Given the region’s tremendous success in achieving water conservation goals well in advance of mandated targets, which has helped lead to record high storage levels, and the prospect of major new investments in large-scale local supply projects, demands will likely remain low for at least the near term. Financing conservation and local supplies based on shrinking volumetric sales could lead to policy decisions to reduce the scale of those programs.” (page 26)
- Increasing Fixed Charges, such as Property Taxes: “Alternatively, a shift to generating more revenue from fixed charges would involve considerable deliberations to identify sources that are both sustainable and equitable.” (page 26)
Increasing fixed charges would mean that agencies that plan to purchase less water from MWD, like San Diego and Los Angeles, would have to pay MWD more money even as they get less water. That creates an economic disincentive to reduce purchases of imported water from MWD. Member agencies also are concerned that MWD may try to impose the costs of Delta conveyance on fixed charges, which would require member agencies to pay for the tunnel project even if they stopped buying water from MWD. MWD currently only spends a tiny fraction of their more than $1.7 billion annual budget on water conservation ($43M) and the Local Resource Program ($43M), but those funds help leverage local agency investments. While California law (Cal. Water Code § 85022) establishes that it is state policy to reduce reliance on imported water from the Delta and invest in local and regional water supply projects, MWD appears to be contemplating changes to rates and charges that would incentivize increased reliance on the Delta and imported water, and discourage investments in local and regional water supplies.
MWD is considering these actions because their business model is broken.
MWD’s 2018 10-year budget forecast estimates that in 2028, MWD will obtain 876,000 acre feet of water from the Colorado River and 956,000 acre feet of water from the State Water Project (50% allocation), for a total of 1.832 million acre feet of imported water. That same 10-year budget forecast estimates that MWD will sell 1.8 million acre feet of water in 2028, generating more than $2.1 billion in revenue (91% of total revenue). The 10-year forecast also predicts that the cost of imported water will rise from $1,015 per acre foot in 2018 to $1,297 per acre foot in 2028.
Yet in 2019, MWD only sold 1.5 million acre feet of water, which MWD admits “will be the lowest in decades.” This trend of declining sales of imported water appears likely to accelerate due to investments in regional water supply projects (water recycling, increased water use efficiency, stormwater capture, and other regional water supply tools) and the increasing cost of imported water. As MWD admits,
“Continuing to rely on variable revenues will drive the need for higher volumetric rates to build and maintain larger reserves for Metropolitan to withstand declines in transactions that last longer periods of time. This can incentivize a downward spiral trend of further rolling off that could strand investments.”
The Worse News
Yes, it gets worse. First, while MWD is looking at cutting the very limited dollars they spend to incentivize local water supply projects and conservation, they are evaluating spending billions of dollars on projects that would increase the region’s dependency on water diversions from the Delta, including potential funding for environmentally destructive projects like Sites Reservoir. Second, even though MWD’s projections show that Southern California can meet the challenge of reduced diversions necessary to restore and sustain the health of the Bay-Delta, MWD staff have been pushing the Trump Administration and Newsom Administration to weaken protections for salmon and other endangered species to increase water diversions from the Delta (sadly, this isn’t a new phenomenon, as MWD staff in prior years lobbied Congress to weaken protections for endangered species in the Delta). Lastly, this email from June 2019 indicates that MWD staff (Roger Patterson) were apparently working with House Republicans to try to enlarge Shasta Dam, despite the fact that this project violates state law.
MWD’s board materials show that Southern California can rise to the challenge of reducing diversions from our overtapped rivers, provided member agencies continue reducing demand for imported water through improved water use efficiency and investments in local and regional water supplies. Los Angeles, San Diego, and other member agencies are doing their part, and MWD should be a partner in these efforts—after all, their Board materials claim that “Every acre-foot of water conserved or developed locally benefits the region.” The Newsom Administration’s water resilience portfolio should be an opportunity to prioritize regional self-sufficiency through actions that meaningfully reduce demand for water from the Delta, including investing in solutions like water recycling, improved water use efficiency, and stormwater capture.
But it appears that MWD’s self-interest and failed business model are standing in the way of a more sustainable water future for Southern California, and for the State as a whole.