The San Diego County Water Authority will begin direct negotiations with Poseidon Resources on an agreement to purchase water from the Carlsbad Desalination Project early next month and expects to have final draft agreement ready for review in early 2012, staff reported to the Board of Directors today.
The Water Authority expects to complete a first full draft water purchase agreement and provide it to Poseidon by November 4. This first draft agreement, which would include terms for price, reliability of deliveries and other factors, will be the starting point for the negotiations.
“We now have all the pre-conditions in place to allow us to discuss face-to-face with Poseidon the exact terms for buying desalinated seawater from the Carlsbad project,” General Manager Maureen A. Stapleton said.
During negotiations, Water Authority staff also will work with Poseidon to complete planning and technical studies related to what capital improvements will be necessary to deliver and integrate water from the desalination plant into the Water Authority’s regional water storage and pipeline system. This information will help determine the total costs that need to be reflected in the final draft water purchase agreement.
The Water Authority expects water from the Carlsbad project will be available by 2016. It also estimates that its wholesale water rates would rise approximately 8 percent to 11 percent if desalinated water from the Carlsbad project is added to its supply mix.
“While desalinated water would be more expensive than imported supplies, the advantage of desalinated water is the greater supply reliability,” Director of Water Resources Ken Weinberg said. “Locally produced desalinated supplies would not be cut back if droughts or regulatory restrictions led to cutbacks in imported water deliveries.”
Once negotiations on a draft water purchase agreement are complete, the Water Authority will circulate the final draft for review by its member agencies and the public. Member agencies must review the agreement and declare whether they intend to purchase directly from the Water Authority, at full cost, a portion of the desalinated water supply from the Carlsbad project as a local supply for their agency.
The Water Authority Board expedited that process today by reducing the previously planned 90-day review period to 60 days.
The public review period will run concurrent with the member agency’s review and will include two Board workshops. The specific dates for those workshops will be determined later.
The Carlsbad Desalination Project, which has been in development since 1998 and has obtained all required permits and environmental clearances, will be the first large-scale seawater desalination plant in California. When completed, it will produce 56,000 acre-feet of highly reliable local water annually – enough to meet the needs of more than 110,000 average single-family households. In 2020, water from the plant would account for about 8 percent of the total regional supply.
Under a term sheet approved by the Water Authority Board in July 2010, the Water Authority could not begin direct negotiations with Poseidon on a water purchase agreement until a number of conditions were met. These conditions included Poseidon terminating all confidentiality agreements with the Water Authority, Poseidon submitting a binding equity commitment from a construction equity investor, and all nine Water Authority member agencies that previously had water purchase agreements with Poseidon indicating in writing their willingness to cancel those agreements and release the Water Authority from all claims. The last of these requirements was fulfilled on September 11 when the city of Carlsbad approved such an agreement with the Water Authority.