ADD WATER PROPOSAL

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ADD WATER PROPOSAL

• June 15, 2009

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I. GENERAL CONCEPTS

• CAWCD provides ADD Water for
• Direct delivery service
• Replenishment service
• Participants enter contract with CAWCD for
• Supply of amount of water
• Direct delivery, replenishment, both
• Supply under contract grows over time
• Member land type contract remains

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• CAP Canal expanded to 2.2 MAF
• Use existing capacity (up to 1.8 MAF) plus
  expanded capacity for ADD water deliveries
• All participants pay for expansion
• No reservation of Canal capacity
• Other infrastructure may be part of ADD water
• Frees up Canal space
• Frees up ADD water supply

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• CAWCD purchases
• Long-term and short-term water
• No reservation of particular water supply (but
  AWS uses allowed)
• Water purchase costs blended

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• Current Contracts and Subcontracts honored
• No interference with delivery of contract amounts
  (presumed to be 1.415 MAF)
• No interference with historic peaking deliveries
• ADD water costs paid by ADD water participants
• Development under ADD water
• Hit wall together
• Replenishment participants not at greater risk
  due to Plan of Operation approval process

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II. GOVERNANCE

• Participants have role in master-planning and in
  decision-making
• Final decisions made by Board
• Not obligated to participate until
• Contracts drawn up
• Wheeling arrangement understood
• Possible two-step commitment process

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III. FINANCING

• Bond for most water and infrastructure capital
  costs
• Make initial buy-in accessible
• Pay-all-upfront model
• increases demand on replenishment services
• reduces participation by smaller communities and
  private water companies

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• Mix of other revenues for capital funding
• Annual holding fee
• Connection fee
• Water rates
• Possible take-or-pay (minimal floor)

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• Participants generally pay same fees and rates
• Replenishment participants pay for replenishment
• Peaking charge possible
• Separate rate for delivery of unscheduled water
• Existing member lands exception

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IV. ORDERING AND USE OF WATER

• Contract requires 20-year planning estimate and
  10-year demand estimate
• Pay initial fee on 10-year demand
• Participant determines demand estimate
• Supply increases each year based on participants
  demand estimate and payment of incremental fee
• Planning estimate updated periodically

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• For example, ADD contract with City entered in
  2012 would
• Call for service of direct delivery water in
  years 2017-2021
• Participant determines delivery amount
• Participant determines how much water is actually
  scheduled and delivered starting in 2017
• In 2013, contract automatically increased for
  water delivery service required in 2022 in 2014,
  increased for 2023 etc.
• In 2012, participants pay buy-in fee for 10-year
  volume in later years, pay incremental amount
• Participant decides when to stop increasing water
  supply

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• Point is that contract increases as demand
  increases over time
• Financial disincentives to over-ordering
• Annual holding fee
• Take-or-pay possible
• AWS impact possible

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• Participants Use of Direct-Delivery Water for
• Municipal purposes
• Industrial purposes
• Agricultural purposes
• Recharge projects
• Location within 3-county area
• Limits on conveyance of
• Add water contract
• ADD water
• Recharge credits through ADD water storage

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V. ASSURED WATER SUPPLY

• CAWCD acquires 100-year water
• Portion allocated to replenishment purposes
• Remainder prorated to designated providers
• Proration based on then 10-year demand adjusted
  by actual use of ADD water supplies
• Procedures worked out before entering ADD water
  contract

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• Minimal changes to AWS program
• Some statutory changes may be required or
  advisable
• Replenishment timeframe
• Replenishment reserve requirements

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VI. OPPORTUNITY TO ADDRESS CAGRD CONCERNS

• Address conflict issue
• Water supply used for both purposes
• Decide now on splitting L-T supplies
• Encourage direct delivery
• Possible targeted replenishment or new direct
  delivery infrastructure

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VII. ARTIFICIAL SEPARATION OF CAGRD FROM ADD WATER

• Does not deal with future conflicts
• Risk that CAGRD left with all short-term supplies
• Price difference forces reliance on CAGRD
• Risk that development continues in ADD water
  participants, but not in replenishment
  participants

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VIII. Benefits to Non-Replenishment Participants

• Recognize that replenishment is useful tool
• Maximize use of Canal
• Maximize use of supplies
• Costs saving due to pooled rates sharing
  infrastructure costs
• Less fighting over L-T supplies
• Potential to address other CAGRD issues
• Present united Central Arizona position

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• Questions?

• 2205986