Top Three Reasons Poseidon’s New Term Sheet SHOULD HAVE been Rejected July 18.


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At 5:30 tomorrow in Fountain Valley, the largely Poseidon-besotted Orange County Water District will once again consider approving the new renegotiated term sheet for the proposed $1 billion Huntington Beach desalination plant (which this blog has been fighting for over a decade.)  Over the last few weeks, our friends at Residents For Responsible Desalination (R4RD) have been printing, one at a time, the top three reasons that any sensible Water Board would reject this term sheet.  Here are the top three reasons:

 Reason 1

(From the OCWD Staff report for June 6, 2018) “The rate OCWD pays Poseidon Resources for water would no longer be indexed to the MWD water supply rate. The District would pay Poseidon’s documented cost of service along with an agreed to return on equity. The new approach is modeled after the San Diego County Water Authority and Poseidon Resources agreement to construct and operate the Carlsbad Ocean Desalination Facility.”

Comments: Poseidon’s “cost of service” has not as yet been documented for public review and its “return on equity” has not as yet been determined. If the San Diego County WA / Poseidon agreement is the model, does that mean we, as ratepayers, should be prepared for desal water to cost in excess of $2,400/ac-ft. and climbing?

Pretty great deal for Poseidon. They get guaranteed profit. We get guaranteed rate increase. Over 30 years that could be well over a Billion Dollars.

Reason 2

(From the OCWD Staff report for June 6, 2018) “The District would assume the risk for electricity rate increases. Under the 2015 Term Sheet, Poseidon was taking on this risk. This represents a philosophical change in how to deal with future electricity rate increases for the following reasons:

  • “Allocating this risk onto Poseidon was not free. Poseidon would have had to charge OCWD a higher rate due to this cost exposure.
  • “With OCWD agreeing to pay the actual cost of electricity, the District should be able to negotiate a slightly lower overall rate for the water. If future electricity prices do increase excessively, it will impact the entire water industry and many water supply sources.
  • “Power cost have remained flat or even decreased in recent years. Under the 2015 Term Sheet, this scenario would have resulted in additional profit for Poseidon.”

Comments:  According to the new terms they are working on, it will be the rate payers paying for any increased costs for electricity. So much for modeling on the San Diego agreement where Poseidon has to pay for increases in electricity rates, which has severely eaten into Poseidon’s Carlsbad profits. According to a Pacific Institute report, the cost of electricity is 55% of the cost of desalinating seawater.  So even a slight increase in electric rate can dramatically affect the cost of desal water as Poseidon has discovered in Carlsbad.

Reason 3

(From the OCWD Staff report for June 6, 2018) “The District would retain the lead role in developing all aspects of the distribution plan. However, there is now an option to have Poseidon Resources take responsibility for financing and constructing facilities distributing potable water to the District, Producers and other retail water agencies. With this option, Poseidon would coordinate the timing of constructing the treatment plant with constructing the distribution facilities to serve potable water to customers.

“This would relieve the District from the responsibility and financial obligation of ensuring these distribution facilities are constructed on time to take water once the desalination treatment plant is complete. The District would retain the discretion of purchasing the distribution system constructed by Poseidon once it is operating.

“The District would not be obligated to take any water from Poseidon until agreements are executed with participating agencies who want to receive the water and the actual distribution facilities were constructed to distribute the water. If the District opts to have Poseidon finance and construct the distribution system, then the final unit cost of water paid to Poseidon would be adjusted.”

Comments: In total, this convoluted claim by OCWD Staff is troubling. OCWD still does not know where the desal water will end up or how the desal water is to be distributed. By Staff’s past public presentations, the desal distribution (or delivery) system would cost between $100Million and $400 Million to design and construct. As to where the desal water is to go, is OCWD going to sell the water? If so, to whom and by what means? How is this to be done when OCWD cannot give the public any assurance of even the cost of Poseidon water, or the cost of distributing it? Staff presents above where “the final unit cost of water paid to Poseidon would be adjusted.” Adjusted by how much?

There are a lot of expensive pipelines and systems to be built to distribute all that water. But so far, no one knows where the water is going or who is going to build all those pipeliness. Does that sound like a good business deal? Tell them NO tomorrow!

Join R4RD… Wed. July 18, 2018 at 5:30
Orange County Water District Headquarters
Ward & Ellis
Fountain Valley, CA

P.S. And now Surf City Voice is reporting that R4RD is asking OCWD board and staff to postpone consideration of this term sheet pending an “investigation” of the possibly illegal use of “ad hoc” committees to negotiate this deal.  Stay tuned… or better yet, see you Tuesday evening in Fountain Valley!  And let’s not give up until this water god slinks away in shame…

Just SOME of our Previous Coverage of Poseidon:


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"Admin" is just editor Vern Nelson or associate editor Greg Diamond sharing something that they mostly didn't write themselves, but think you should see. Before December 2010, "Admin" may have been former blog owner Art Pedroza.