Orange County Water District eyes deal with planned desalination plant

Potential terms call for water district to eventually buy from a planned Huntington Beach desalination plant

Faced with the continuing drought, Orange County water officials are looking into the possibility of purchasing water from a proposed Huntington Beach ocean desalination plant.

Poseidon Water hopes to start construction on the facility in 2016 next to the AES power plant at Newland Street and Pacific Coast Highway, though it first needs a development permit from the California Coastal Commission. Its application may be reviewed late this year.

The Orange County Water District's board of directors last week voted to approve a document with Poseidon Water that the two agencies can use to negotiate the cost of water should the district decide to buy water.

The district covers most of northern Orange County, including Huntington Beach, Fountain Valley, Costa Mesa, Newport Beach, Seal Beach and Irvine.

John Kennedy, the water district's executive director of engineering and water resources, told directors that approving the term sheet does not legally commit the district to buy water from Poseidon, though "we are committing to fully consider the project and work toward developing a water purchase contract." The contract would last 50 years.

"It is not a 100% done deal today," said board member Harry Sidhu, whose sentiment was shared by other members. "It is just a good start in moving forward."

Kennedy said there was no timetable for the board to vote on a contract to purchase water, though the district hopes to have a proposed agreement by the end of the year.

According to the term sheet, Poseidon would own, finance, construct and operate the plant, which is estimated to cost $1 billion. The water district would purchase the facility after 30 years.

The district would purchase water from the company, as well as own, finance, construct and operate any necessary distribution facilities to send the water to users. The district also would be responsible for finding those users and deciding whether to use water from the plant to recharge groundwater.

Several changes have been made to the term sheet since it was introduced in March. One change enabled the water district to negotiate a tiered fee pegged to the cost of treated water from the Municipal Water District of Orange County.

The Municipal Water District charges $1,003 per acre-foot for treated water. Poseidon could tack on up to 20% of that rate during the first 10 years of the 50-year contract for desalinated water, up to 15% during the second 10-year period, up to 10% in the third and up to 5% in the fourth. No premium would be charged during the last 10 years of the contract. The initial document did not include a premium lower than the maximum.

The Orange County district currently buys untreated water from the Municipal Water District for about $660 per acre-foot.

Another change to the term sheet requires Poseidon to show that its Carlsbad desalination plant, which is scheduled to open by November, had operated successfully for 90 days before the district would commit to the Huntington Beach facility.

Kennedy said the changes keep most of the risks on Poseidon's plate and prevent a complicated public-private partnership.

Last week's vote also allocated $230,000 for water district staff to analyze four issues associated with the project.

The district will further investigate how the water would be distributed and how much the district would sell to users. It also will try to determine whether there are issues with mixing desalinated water with imported water and groundwater, assess the future reliability of the Municipal Water District as a source and analyze whether Poseidon's project is financially stable.

Orange County district board members Jan Flory, Philip Anthony and Roger Yoh dissented, calling the plan incomplete.

Flory said she could not decide whether purchasing Poseidon's water is best for the district if there are no alternatives to compare it with.

"It may be that, at the end of the day, Poseidon is a great development," she said, "but to make a decision on it and move it forward incrementally does a disservice to our ratepayers and to people who are concerned about the environment and all the other issues that revolve around this."

Dozens of union workers and representatives urged board members to approve the project, saying it would create jobs and provide Orange County with a new water source.

State Assembly members Matthew Harper and Travis Allen, both Republicans from Huntington Beach, supported the proposal via video messages. Former Huntington Beach mayors Joe Carchio, Shirley Dettloff and Vic Leipzig also voiced their support.

Leipzig said that although purchasing desalinated water from Poseidon would be more expensive than buying water imported from the Colorado River, continuing to rely on imported water could further harm the environment.

"The delta at the Colorado River is today a desert vastly larger than the area of Orange County," he said. "We must move away from imported water."

But former Huntington Beach Mayor Debbie Cook and other residents of Huntington Beach, Fountain Valley, Costa Mesa, Westminster and Garden Grove said the district should study allocating its water to cities based on population because it would encourage conservation.

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