20 years ago, a few people in the city of Oxnard were concerned about the long term available of local groundwater. Some people felt that if local wastewater could be cleaned, it could be recycled back into the local water system, thus the GREAT (Ground water Recovery Enhancement And Treatment) Program was conceived and is currently being implemented. The GREAT Program will have the capacity of generating 28,000 acre feet of recycled water every year. Capacity or production is being built in 7,000 acre feet increments. Each increment is referred to as a skid. The current capacity is 1 skid, capacity for the second skid is currently under construction. The assumption at the time of the GREAT program was started is that there would be a demand for GREAT Water. Demand is driven by cost. There are several cost components to the GREAT Water. Construction, finance, production and delivery are the major cost components for GREAT Water. Demand is also driven by alternative economic choices; why would someone pay $1,300 for a unit of water if they are currently paying $100.00; the $100.00 per unit of water may not be available.
Local farmers may pay $100.00 for a unit of water, that water may be used for irrigation, it does not have to be drinkable water (potable water). It costs the city of Oxnard about $600.00 to produce a unit of potable water. Due to over drafting of the local aquifers by cities and farmers, there is not sufficient amount of local potable water, so the city has to import water at $1,100 per unit. The city then mixes local water with imported water to assure that there is sufficient local potable water. It is expected that the cost of imported water will increase to $2,000 per unit within 10 years, as the cost to develop and deliver new water goes up The Delta Project in Northern California is the expected source of new water.
One of the purposes of the GREAT program is to supply sufficient non potable water that can be used for irrigation and non drinking purposes so that potable water is available. The GREAT Water has to be delivered in order for it to be used. A major water user, Proctor and Gamble needs clean water. It uses imported water, water that is not mixed with city water and pays for the water at local rates, not the imported rate. The difference is subsidized by all the other water users. GREAT Water is priced to be 85% of the rate charged for industrial users. It is my understanding that Proctor and Gamble is willing to use GREAT Water rather than imported water because the GREAT Water is cleaner than imported water. The GREAT Water needs to be delivered to them, but it will cost several million dollars to build a pipeline from Ormund Beach, where the GREAT Water is being generated to Proctor and Gamble on Rice Avenue. It is conceivable to build a GREAT Water line up Rose Avenue, similar to the GREAT Water line that transverses Ventura Avenue. The GREAT Water lines can have lateral water lines to provide non potable water to irrigate the landscape at schools, parks, and street medians. These lateral line will also be capable to deliver non potable water to industrial parks to service companies whose needs are similar to that of Procter and Gamble.
I estimate that if 18,000 units (less than 3 skids) of GREAT Water can be sold at the rate set by Oxnard City Council in the Summer of 2012, the unit cost of the GREAT Water would be close to $1,300 per unit, the price the water is being sold; a break even opportunity. The cost would be less than the $2,000 per unit of future expected costs of imported water. I estimate that if 2 skids of GREAT Water were sold, the unit cost of that water would be close to $1,600 per unit.
The biggest player in the local water market is the Metropolitan Water District (MWD). MWD provides water to Los Angeles County from the Colorado River and Northern California. The MWD Mission Statement (from their web site) reads as follows: “Mission Statement The Metropolitan Water District of Southern California is a consortium of 26 cities and water districts that provides drinking water to nearly 19 million people in parts of Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura counties. The mission of the Metropolitan Water District of Southern California is to provide its service area with adequate and reliable supplies of high-quality water to meet present and future needs in an environmentally and economically responsible way. Metropolitan currently delivers an average of 1.7 billion gallons of water per day to a 5,200-square-mile service area.“
Calleguas Water District is a member agency. An initial 3 year attempt to sell GREAT Water Calleguas failed in part when Calleguas wanted to exchange water credits (which have no market value) instead of cash. I recommend that an MOU (Memorandum of Understanding) be negotiated with MWD instead of Calleguas where as the GREAT water would be sold at 80% of the cost of water imported from Northern California at rate no less than $1,300 per acre. MWD would be committed to buy a given annual capacity (19,000 acre feet of 21,000 acre feet of production capacity or 24,000 acre feet of 28,000 acre feet of production) for a certain period of time 15, 20, 25 years. Such a MOU would provide assurance to the debt market so construction can take place to create capacity that can be sold rather than the current situation where the GREAT Water is too expensive to be sold. Water isn’t being produced, but rate payers are still paying the debt on the construction loans.