MWD Board Authorizes Record-Setting 2002 State Water Project Payments

While California's power crisis winds down, the fiscal impacts continue to reverberate as Metropolitan Water District's board of directors today authorized the single largest annual payment in district history for state water deliveries next year.

The payment of up to $563 million to California's Department of Water Resources (DWR) for anticipated 2002 deliveries through the State Water Project -- over $140 million more than MWD's estimated SWP costs this year -- also amounts to the largest item in Metropolitan's $1 billion budget.

"Through strong financial management and prudent planning, we are able to absorb the increased state project payments without increasing our water rates," said Metropolitan's Chief Financial Officer Brian Thomas. "This is a conservative DWR estimate and we anticipate that our actual state payments ultimately will be lower, reflecting today's power market."

The board action comes just days after DWR's announcement that, because of the lack of water stored in the SWP system, the state can at this point only promise 20 percent of requested supplies delivered through the state project.

"Despite the conservative initial state allocation, Metropolitan stands ready to meet Southern California's imported water supply needs because of the investments the region has made in its portfolio of resources," said MWD's Chief Executive Officer Ronald R. Gastelum.

"To bolster Metropolitan's supplies from the Colorado River and the state project, Southern California has invested billions of dollars to diversify the region's water resources and decrease its dependence on imported water. We've done this through increased reservoir and groundwater storage, water conservation and water recycling," Gastelum said.

DWR owns and operates the State Water Project system of dams, reservoirs, power plants and aqueducts delivering water from the western slope of the Sierra Nevada in the north part of the state to the San Francisco Bay area, San Joaquin Valley cities and farms and urban Southern California.

Metropolitan's payments -- up to 40 percent of the district's operating budget -- primarily cover the district's portion of fixed operating and capital costs for the giant state project. Those payments, however, also include MWD's share of power to pump SWP supplies to the south coastal plain, which skyrocketed during the state's power crisis earlier this year. In 2001, Metropolitan's share of the SWP's variable power charges will be $117 million more than anticipated.

As the importer and wholesaler of more than 50 percent of the water used by 17 million urban Southern Californians, Metropolitan obtains its supplies from two main sources: the state project and Metropolitan's own 242-mile Colorado River Aqueduct. SWP deliveries meet about 30 percent of Southern California's total water needs and, once blended with Colorado River water, help reduce the amount of corrosive salt in overall water supplies.

The region's other water sources are the city of Los Angeles' aqueduct that channels some of that city's supplies from the eastern slope of the Sierra Nevada, as well as local groundwater resources. Use of resources such as groundwater, storage, conserved and recycled as well as stored water will be taking on an increasing role in the region's water supply mix.

Because it contracts for about half of the water provided by the state project and is one of the agencies farthest from the project's source water, Metropolitan incurs the largest portion of the DWR's costs, about 65 percent of all contractors' payments over the life of the project.

The Metropolitan Water District of Southern California is a cooperative of 26 cities and water agencies serving 17 million people in six counties. The District imports water from the Colorado River and Northern California to supplement local supplies and helps its members to develop increased water conservation, recycling, storage and other water-management programs.

The Metropolitan Water District of Southern California

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