Why All the Rush Over Falling Water?
By John Duarte
MID leaders have taken up an urgent review of a falling water credit that water users receive for the value of the hydroelectric power generated at Don Pedro. This sudden “crisis” follows a series of fast moving actions on the part of MID following the failed (board vote 5-0) water sale proposal previously championed by Board President Tom Van Groningen. Many participants in the water sale dialogue/debate requested that the district form advisory groups to review district issues more in depth, over longer terms and with better access to district experts than the board meetings allowed.
The current advisory committee proposed by the board, selecting representatives from local groups to form a committee of committees, is more likely to be an effort to weight the group against ag in order to extract a particular outcome, rather than to improve the dialogue surrounding complex and important issues. In addition to a selected membership with no guarantee of transparency, the committee will be charged to address speculated claims under Prop 26. It appears that some district leaders would like to see the equivalent of six wolves and a lamb vote on what’s for lunch, while piping the scent of simmering lamb into the room.
A review of the district history and current situation is in order. Irrigation districts frequently possess riparian water rights that can be used to generate hydroelectric power. With the available water flow, technology and marketability of electricity, any irrigation district that did not develop hydroelectric power from these resources would be negligent towards its irrigation customers and the public for the lost opportunity.
Irrigation districts have multiple options as to how they choose to market the generated hydroelectric power. The two most frequent choices are to market it wholesale to a second party (as does SSJID and OID from their New Melones project), or to form local power authorities and market it retail to local customers (as does MID and TID from the Don Pedro project).
SSJID and OID use the revenue from wholesale power sales to benefit their agricultural water users, to the point where water costs are negative and rebates are often sent to customers from the power revenues. PG&E buys the power wholesale and delivers it to its customers as part of a supply blend over a large market area. All sales and costs are established in free market transactions. Electric ratepayers in the irrigation district boundaries are served by a for-profit utility and do not enjoy any financial benefit from the cheap hydroelectric generation.
Many OID and SSJID area electric customers are served by MID power delivery per the four cities annexation that MID executed in the 1990s. Other OID and SSJID customers are now considering options to form their own power distribution company. I do not believe that these efforts will lead to the irrigators giving up the benefit of the hydroelectric power to the retail electric customers. There are few voices in the PG&E power service area that would not prefer to be in a locally run municipal service area.
MID and TID chose early on to provide retail delivery of their hydroelectric power to in-district electricity customers. This has given our communities the advantage of locally governed municipal power. For many decades MID and TID ratepayers enjoyed enviably low electric rates in contrast to those served by for-profit delivery, particularly those served by PG&E. MID and TID irrigators have gained from the value of the falling water based on their well-established senior water rights. This arrangement has provided great benefit to the community in affording low rates for both electric and irrigation customers, local control and better accountability.
MID now faces a number of financial challenges. The district is increasing costs of operating beyond the growth of its power deliveries. From 2010 to 2011, MID increased overhead costs by 20 percent or six million dollars as it delivered slightly less electricity than the year before. MID projects to increase total costs of operations by 5% per year from 2013-2017 while it delivers only slightly more (0-1% per year) electricity. This is all on top of an already bloated budget that is absorbing a number of past strategic errors (Mountain House, over purchase of green power, four cities, pension benefit giveaways, Phase 2 Water Plant…).
Recently, a water sale of a significant amount of the district’s water was proposed by the district. The revenues from this sale were to go to the district’s general fund to serve a long and exhaustive list of financial needs. The sale was opposed by local interests and failed. The proposal that failed would have raised $1.5 million dollars per year. This amounts to one-fourth the increase in the districts overhead in just one year.
Adjusting the falling water charge will not provide equity between customer groups within the district. It may not be required by prop 26. If it is required by prop 26, there may be a number of irrigation districts that need to take a broad look at the beneficiaries of their hydroelectric generation. It will also not substantially alter the financial course of MID or the obligations of its electric ratepayers.
This demand by MID Board President Tom Van Groningen for an extremely urgent review of the policy appears to be his personal tantrum over the failure of his ill-considered water sale. It must have be a very personal failure for him, as he may have seen it as a last ditch effort to redeem his decades of failed service and a litany of ill-considered and costly MID initiatives adopted under his reign.