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WATER COSTS
Revised April 2001
Much has been written and discussed about the price of water in Westlands Water District, the largest and one of the most efficient water delivery agencies in the nation. Federal policies, like the Reclamation Reform Act of 1982 and the Central Valley Project Improvement Act of 1992, have had major impacts on the cost of water for farmers in Westlands. Long gone are the days of a flat-rate for federal water. Today, the increased demand on water in California has resulted in a less-certain and a considerably more expensive water supply for farmers in Westlands.
Background
Westlands delivers irrigation water to over 600 farmers on the west side of Fresno and Kings counties. The District has two contracts with the U.S. government for a total of 1,150,000 acre-feet (AF) of water from the federal Central Valley Project. The water, originating some 300 miles north of Westlands, is distributed to each farmer in a closed pipeline distribution system, with meters at the canal and at each on-farm delivery. Unlike most agricultural water delivery agencies, all water in Westlands is metered. Farmers pay both annual operation and maintenance costs as well as benefit assessment charges for repayment of the District's distribution and drainage systems.
CVP water is initially allocated to two different priority areas in Westlands. Area I is the original 400,000-acre Westlands, which entered into a 40-year water service contract in 1963 for the delivery of 900,000 AF annually, called 1963 Contract water. In 1965, the federal Bureau of Reclamation urged Westlands to merge with its western neighbor, Westplains Water Storage District. Since Westplains did not have a water contract, the Bureau committed an additional 250,000 AF of Provisional water for the added area, identified as Area II. A third priority area (Area III) receives water only after the needs of the other two areas are met.
Water Rates
Westlands and its farmers pay a variety of rates to the Bureau of Reclamation for its CVP water. The rate depends on the type of water a farmer uses (either CVP 1963 Contract or Provisional water) and whether the farmer is under the original Reclamation law with a 160-acre limitation or under the revised 1982 Reclamation law with a 960-acre limitation.
There are four different rates set by the Bureau for CVP water. Several other rates are added to these rates that comprise the per-AF price farmers pay for water in Westlands.
CVP Rates
1963 Contract Rate:
This rate applies to water provided under the 1963 Contract to lands which are subject to the original law (the 160-acre limitation), but are not subject to full cost. For the 2000-01water year, this rates applies to about 4,986 AF of CVP water, or only one percent of the expected deliveries.
Operations & Maintenance Rate (O&M):
As required by the Reclamation Reform Act of 1982, the O&M Rate applies to CVP water provided to water users under the 1963 Contract with landholdings of 960 acres or less. The O&M Rate is adjustable annually and covers the Bureau's estimated costs to operate and maintain CVP facilities. Most of the water in Westlands is sold at the O&M Rate -- about 410,499 AF, or 69 percent of the 2000-01 total supply.
Cost-of-Service Rate:
This rate applies to all CVP contract water provided under the Provisional water contract, unless the land is subject to full-cost. This rate includes the O&M charge, plus an amount to repay capital costs by 2030. This rate applies to 126,315 AF, or about 21 percent of Westlands' expected deliveries for the 2000-01 water year.
| Westlands Water District 2001-02 Water Rates |
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| 1963 Contract |
O&M | Cost of Service |
New Law Full Cost* |
Old Law Full Cost* |
| $38.69 | $64.44 | $75.19 | $101.82 | $116.01 |
| * 1963 Contract full cost rates | ||||
Full Cost Rate:
The Full Cost Rate applies to water delivered to leased land in excess of the 960-acre limitation under "new law" or 160 acres under "old law." In addition to the O&M and capital repayment components of the Cost-of-Service Rate, the Full Cost Rate includes interest on the remaining capital costs of the project facilities. The interest is determined by a interest-setting formula in the 1982 Act. The Full Cost Rates apply to 52,731 AF, or nine percent of the expected water deliveries for the 2000-01 year.
Other CVP Rates:
The CVP Improvement Act added additional costs to water delivered to Westlands. Farmers have been paying into an environmental restoration fund established by the CVP Improvement Act since Oct. 1, 1993. To-date, Westlands has paid over $35-million into the CVPIA environmental restoration fund. For the 2000-01 water year, the rate will be $7.28 per AF.
The 2000-02 rates also include a binding agreement rate component of $9.63 per AF as part of the CVPIA's "hammer clause" provision forcing districts into early renewal of their existing water contracts. Under the CVPIA, districts are required to pay an additional 1-2 times their current restoration fund amount to the Bureau unless they have signed a binding agreement to early renewal of their contracts. If negotiations fail to secure a new contract, districts are required to pay the hammer clause amount retroactive to Oct.1, 1997.
Westlands has been collecting funds since 1998-99 to set aside in a trust fund account in the event negotiations are not successful. If the contract is renewed, these funds will be returned to the farmers with interest.
District O&M Rate
The total water rate also includes a Westlands' operations and maintenance rate to cover the expenses of the District, including salaries, maintenance activities, and the District's involvement in water supply and water policy issues. For the 2001-02 water year, this rate is $11.79 per AF.
What Do Farmers Actually Pay for CVP Water?
Assuming similar percentages for water types in 2001-02 as for 2000-01, Disrict farmers will pay a weighted average water cost of approximately $69.80 per AF for water. This is 10% higher than the 2000-01 average water rate of approximately $63.48 per AF, and nearly four times the average rate of $18.65 per AF farmers paid in the 1985-86 water year.
Land-Based Assessments
In addition to the direct water charges previously discussed, Westlands Farmers pay a benefit assessment charge ranging from $0.92 to $5.10 per acre. The assessment differs for lands with the distribution system and for lands without the system. The assessment applies to the repayment of the construction cost of the District's internal distribution and drainage system, and are collected once a year.
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Westlands Water District |
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Year |
CVP Supply |
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1985-86 |
100% |
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1986-87 |
100% |
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1987-88 |
100% |
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1988-89 |
100% |
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1989-90 |
100% |
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1990-91 |
50% |
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1991-92 |
25% |
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1992-93 |
25% |
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1993-94 |
50% |
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1994-95 |
35% |
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1995-96 |
100% |
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1996-97 |
95% |
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1997-98 |
90% |
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1998-99 |
100% |
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1999-00 |
70% |
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2000-01 |
65% |
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The District also collects land-based charges averaging $7.68 per irrigable acre to cover administrative and internal costs.
Non-CVP Water Purchases
Since 1990, Westlands has been faced with unreliable water supplies stemming from a natural drought and environmental regulations, and has had to rely on purchasing water from other sources. Since 1989-90, Westlands has received its full allocation in only two years, 1995-96 and 1998-99, and these were two extremely wet years(see table).
Since that time, the District has purchased over 1.6 million AF of short-term supplemental water from a variety of sources, mostly from other water agencies south of the Delta.
Supplemental water typically comes at amuch higher price than the CVP contract supply, ranging from an average of $45 per AF in 1995 to an average of $116 per AF in 2000.
Conclusion
Clearly, the delivered price of water in Westlands is determined by many complex factors that are overlooked in the simplistic rhetoric about "cheap" and "subsidized" federal water for farmers. Average water rates in Westlands have increased -- a trend that will likely continue for many years to come.
Despite increased water rates in Westlands, agricultural water users are often criticized for paying less for water than urban users. To directly compare the cost of water to farmers and city dwellers is misleading because such comparisons ignore the differences in the delivery mechanisms of ag and urban water systems. Likewise, ag water users do not require the same level of water quality treatment and reliability as urban users. By law, city water users have priority, so in times of shortage, farmers are the first to have their supplies cut.
To recap, all of the District's CVP debt will be repaid by 2030. And, the benefit from the investment made by the United States in the federal water project benefiting the west side will continue well into the future. Unlike many government programs, this one works. It works for all of us as consumers who enjoy an inexpensive, wholesome domestic food supply and fiber products, and as taxpayers who benefit from the economic activity generated from the developed water resource.