Consumers have two very reasonable questions when it comes to any proposed big-ticket public project that may affect their utility bills: What is the project going to cost me? And what is the approximate cost of an alternative?
We at Metropolitan answer those questions and more in our latest policy white paper providing a detailed look at the financial planning
for California WaterFix.
The financial analysis, which will be discussed at a joint committee meeting of our Board of Directors on Monday, Aug. 14, indicates that the average Southern California household would pay in the range of approximately $2-3 a month more for California WaterFix, based on today's project estimates and interest rates. That's even a better deal than the $5 per month figure we previously estimated.
Given the importance of this project to maintain water supply reliability for the region, these are encouraging numbers. It also goes to show the ability of the Southland region to fund major infrastructure projects by pooling our resources.
Metropolitan serves 26 member agencies and a six-county service area population of nearly 19 million people. Residences pay about 70 percent of water costs. And at the moment, there are about 6.2 million households in our service area.
Our latest in a series of three policy white papers takes the state's three-year-old estimates of WaterFix costs and updates them to 2017 figures. As a base case, we assume that Metropolitan would pay for about 26 percent of the overall costs, representing our traditional share of the State Water Project and Central Valley Project combined. We also presume that interest rates would stay about the same, in the range of 4 percent.
Under these base case assumptions, the rate impacts of California WaterFix on the average household are less than $2 a month. This is lower than estimates we made back in 2013, largely due to the interest rate assumptions. We look at higher cost scenarios as well, and a scenario of investing in local alternatives such as desalination far beyond any of today's local plans.
While increasing local supplies are essential toward meeting the future demands, they are typically more than double the cost of maintaining our SWP water deliveries from Northern California.
When it comes to financing, we are looking for the most affordable ways to borrow funds for construction while minimizing risks. More work lies ahead on allocating costs and financing options, including decisions by other state and federal water contractors. However, this cost analysis is an important step to help our board understand and evaluate the cost-effectiveness and benefits of this important project for our service area.