The strategy historically implemented by the District Board of Directors is to set annual water rates at a level that recovers the expenses associated with available water supply for that year. In addition to revenue received from water sales, a majority of the revenue received from standby charges and the Friant Power Authority project are also used to offset annual water-related expenses.
Expenses associated with the District's water supply fluctuate from year-to-year based on the following factors.
- The amount available and cost of the District's class 1 supply
- The amount available and cost of the District's class 2 supply
- CVPIA Restoration fund environmental charges
- State Water Resources Control Board fees
- Friant-Kern Canal Operation and Maintenance expenses
A brief description of each of these water-related expense centers is provided.
Class 1 and Class 2 Water Availability and Cost
The Friant Division of the CVP employs a unique "Class 1/Class 2" water contracting system. Class 1 water is commonly referred to as the "firm yield" of the project. The first 800,000 acre-feet that is made available from the project is Class 1 water. There are many years that the project does not even yield all of the Class 1 water.
Class 2 water is the next 1.4 million acre-feet that develop from the project. Class 2 water is available only after all of the Class 1 water has been made available. In an "average" water year, about 650,000 acre-feet of Class 2 water develops from the project.
As the firmer water supply, Class 1 water is more expensive than Class 2 water, typically about 35 percent more costly. The cost of Class 1 and Class 2 water is set each year by the U.S Bureau of Reclamation.
DEID has contracted for 108,800 acre-feet of Class 1 water, representing 13 percent of the total firm yield of the project. It also has 74,500 acre-feet of Class 2 water. Because of the variability of the annual amounts of both Class 1 and Class 2 water that is available, the cost of the water can also vary greatly. The more of the less expensive Class 2 water that is available that can be blended with the more expensive Class 1 water, the less expensive the blended acre-foot water cost is to the District, and ultimately, for the grower.
CVPIA Restoration Fund Environmental Charges
With the passage of Public Law 102-575, (the Central Valley Project Improvement Act of 1992, or CVPIA) the District is also required to collect and remit to the Bureau an environmental charge for every acre-foot of water delivered. This charge funds a CVP-wide environmental restoration fund that is administered by the Department of the Interior.
The CVP-wide assessment is subject to annual modification (October 1 of each year) and is approximately $8.50 per acre-foot.
For those in the Friant Division of the CVP, there is another Restoration Fund component: the Friant surcharge. The Friant surcharge is a flat rate that began at $4.00 in 1992 and was subject to scheduled CVPIA-mandated increases in 1995 and 1999. The last and final of these mandated increases brought the surcharge to a total of $7.00 per acre-foot.
Therefore, DEID pays an in excess of $15.50 per acre-foot on all water delivered.
State Water Resources Control Board Fees
In reaction to the state's budget crisis, in 2003 the California legislature withdrew all general fund monies that previously supported the activities of the State Water Resources Control Board. In place of those funds, the legislature passed a bill directing the SWRCB to levy new fees annually on all water rights holders in California to fund it's operations. DEID pays this annual fee directly to the state, as do all Friant Division districts.
Friant-Kern Canal Operations and Maintenance
In addition to the above water rates paid to the Bureau of Reclamation, the District also pays a flat rate for its pro-rata share of the operations and maintenance costs of the Friant-Kern Canal and other CVP features. This assessed amount, calculated on a rolling 25-year average of water deliveries, is paid directly to the Friant Water Authority. The current FY07 cost paid by the District is anticipated to be in excess of $1,544,602.