[env-trinity] Fitch Ratings Concludes Delta Tunnels Project Would Further Increase Water Rates

[Dan Bacher]

https://www.dailykos.com/stories/2017/8/17/1691036/-Fitch-Ratings-Concludes-Delta-Tunnels-Project-Would-Further-Increase-Water-Rates



The San Joaquin River at Lauritzen Yacht Harbor. Photo by Dan Bacher.


Fitch Ratings Concludes Delta Tunnels Project Would Further Increase  
Water Rates

by Dan Bacher

On August 16, Fitch Ratings confirmed what Delta Tunnels opponents  
have been saying for years — the proposed California WaterFix project  
being currently fast-tracked by the Trump and Brown administrations  
would likely drive a significant increase in monthly water rates.
This increase in water rates would have a particularly egregious  
impact upon people in low income and environmental justice communities  
in Southern California that are right now struggling to pay their  
water bills. The increase in water rates driven by the construction of  
Jerry Brown’s “legacy project," the Delta Tunnels, would only make  
things worse for families having a hard time getting by in these  
difficult times.

The ultimate fate of the California Water Fix, the controversial plan  
to divert water through two 35 mile long tunnels under the Sacramento  
San-Joaquin River Delta, is “nearing resolution as agencies that would  
benefit from, and pay for such water, take a position on the outcome,”  
according to an analysis from Fitch Ratings.

The Trump and Brown administrations and project proponents claim the  
tunnels would fulfill the “coequal goals” of water supply reliability  
and ecosystem restoration, but opponents point out that project would  
create no new water while hastening the extinction of winter-run  
Chinook salmon, Central Valley steelhead, Delta and longfin smelt,  
green sturgeon and other imperiled fish species.

The project would also imperil the salmon and steelhead populations on  
the Trinity and Klamath rivers that have played a central role in the  
culture, religion and livelihood of the Yurok, Karuk and Hoopa Valley  
Tribes for thousands of years.

“The estimated $16.3 billion in project costs would be borne by the  
utilities' rate payers, including State Water Project (SWP) and  
Central Valley Project (CVP) members,” Fitch Ratings noted. However,  
economists have estimated the real cost of the project could go as  
high as $68 billion, including payment of debt on the bonds issued.

Fitch Ratings said the Metropolitan Water District of Southern  
California (MWD), a SWP wholesaler to 26 member agencies serving about  
19 million residents, expects to bear about one-quarter of the total  
cost.

MWD estimates the monthly household bill within its service territory  
would increase by only about $2-$3, but both Fitch Ratings and Delta  
Tunnels opponents say this low ball estimate could go much higher.

“The MWD estimate is based on a cost split for the Fix of 55% SWP and  
45% CVP,” Fitch Ratings explained. “However, this assumes that all  
other SWP and CVP contractors sign on to the Fix. The cost to MWD and  
its ratepayers could be higher if some contractors decline to  
participate.”

Fitch Ratings noted that the timing and ultimate cost of the project  
“are important to California's water and sewer utilities, as this cost  
ultimately will be passed on to end users.”

“Many California utilities implemented substantial rate increases or  
alternative rate structures in recent years to mitigate significant  
declines in financial margins in fiscal years 2015 and 2016 due to  
conservation-related demand declines resulting from the state's five- 
year drought. The cost related to the Fix would be an added charge,”  
the analysis stated

“Ratepayers have thus far shown a willingness and ability to absorb  
higher rates and most California utilities have ratepayer bases able  
to bear the estimated increase to fund the Fix. However, some agencies  
have water bills that already exceed Fitch's affordability threshold  
(combined water and sewer utility bill equal to, or higher than, 2% of  
median household income) and could become more pressured,” Fitch  
Ratings concluded.

The Fitch Ratings analysis follows the release of a white paper by MWD  
staff concluding that the WaterFix is the "most cost effective”  
alternative to ensuring affordable and reliable water supplies: www.mwdh2o.com/ 
...

“If we keep our existing imported water supply, made more reliable  
with California WaterFix, it would cost approximately $2-3/mo. per  
average household in the Metropolitan service area,” the report  
stated. “If we tried to develop new local supplies to replace the  
imported water supply we would lose without California WaterFix, it  
would cost two or more times as much per average household in the  
Metropolitan service area.”

Restore the Delta (RTD) submitted a response to MWD’s third and final  
Delta Tunnels white paper exposing what the group described as “the  
gaping holes” in MWD’s financial analysis on various California  
WaterFix costs.

“With its latest financing paper, MWD pedals a wish and a prayer to  
its board that a $17 billion Tunnels project will only cost its 6.2  
million residential customers $2 to $3 per month,” said Tim Stroshane,  
RTD policy analyst. “MWD’s rosy picture omits the cost of their  
customers’ Tunnels water use. This is analytical malpractice of the  
highest order.”

Likewise, Kyle Jones, policy advocate for Sierra Club California,  
said, “Metropolitan Water District continues to paint the Tunnels in  
the best light, using the lowest cost estimates possible. This  
proposed fantasy ignores costs of mitigation for their environmental  
harm, and assumes that all contractors are willing to pay for this $68  
billion boondoggle.”

Jones said Metropolitan also “cherry picks” alternative options for  
the Tunnels that look at only the most expensive options.

“Any true alternatives analysis, including conservation, efficiency,  
and groundwater cleanup, would show that there’s a better path forward  
for Metropolitan customers to develop a climate-resilient water system  
that isn’t conditioned on destroying the San Francisco Bay Delta,"  
said Jones.

“MWD's failure to analyze water costs in dry and drought years and  
water use by consumers so as to determine the real cost per household  
for WaterFix make this analysis invalid,” concurred Barbara Barrigan- 
Parrilla, RTD Executive Director. “MWD staff clearly wants to build  
this project so that water can be sold for maximum profit.”

Dr. Jeff Michael, University of the Pacific economist, and Doug Obegi,  
NRDC senior attorney, wrote similar analyses of the MWD white paper.

On August 14, MWD held a public workshop on plans to fund the Delta  
Tunnels.  Ratepayer group representatives at the meeting charged that  
the tunnels will burden them with higher bills for water to be used  
primarily by corporate agribusiness interests, now irrigating drainage  
impaired land on the west side of the San Joaquin Valley. To read the  
LA Times story on the workshop, go here: www.latimes.com/…

“Metropolitan Water District’s finance plan for the Delta Tunnels,  
estimated to cost at least $17 billion, confirms that the project  
would burden Southern Californians with higher water bills to pay for  
tunnels that won’t deliver them any new water,” said Brenna Norton,  
senior organizer for Food & Water Watch. “Metropolitan’s cost  
assumptions are misleadingly low as they do not include interest  
repayment, and are based on the dubious assumption that agricultural  
districts will pay for 45 percent of the project.”

Norton said a  “more realistic estimate” of the project’s costs to Los  
Angeles households would be from $7 to $16 per month for more than 40  
years, amounting to over $3300 per household, according to one  
independent study.

She also said the tunnels would impose an “unfair, useless tax” when  
money is desperately needed to fix Southern California’s aging pipes  
and to build storm water infrastructure to increase the local supply.  
Norton urged cities and water agencies that make up Metropolitan’s  
board, including Los Angeles and the Central Basin Water Agency, to  
“protect their taxpayers and reject this wasteful project.”

Over the past few weeks, the Brown administration has incurred the  
wrath of environmental justice advocates, conservationists and  
increasing numbers of Californians by ramrodding Big Oil’s  
environmentally unjust cap-and-trade bill, AB 398, through the  
legislature; approving the reopening of the dangerous SoCalGas natural  
gas storage facility at Porter Ranch; green lighting the flawed EIS/ 
EIR documents permitting the construction of the California WaterFix;  
and issuing a “take” permit to kill endangered salmon and Delta smelt  
in the Delta Tunnels.

Governor Brown also showed his authoritarian bent by accusing AB 398  
critics of practicing “forms of political terrorism that are  
conspiring to undermine the American system of governance” in an  
interview with David Greene of NPR (National Public Radio) on July 25: https://www.dailykos.com/stories/2017/7/27/1684343/-California-Governor-accuses-opponents-of-Big-Oil-s-cap-and-trade-bill-of-political-terrorism

When Fitch Ratings, environmental leaders, and a greatly respected  
economist all agree that the Delta Tunnels will further increase water  
rates substantially more than the Metropolitan Water District  
estimates, then you know it’s time for MWD and other agencies to  
reject Governor Brown’s environmentally destructive and enormously  
expensive project once and for all!

To read the Fitch Ratings Analysis, go here: www.fitchratings.com/…

To read Restore the Delta’s response, click here.

To read Obegi’s blog, click here.

To read Michael’s blog, click here. 
  
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