Westlands Water District and other Central Valley Project (CVP) contractors have a sweet deal with the Bureau of Reclamation (USBR). Contractors pay only for the water they receive, so in years when water deliveries are less than projected, revenues don’t recover the federal investment in the project. But in years when actual water deliveries exceed projected deliveries, excess revenues are refunded to the contractors instead of being used to reduce unpaid capital costs and Operations and Maintenance deficits.
That’s what we mean when we say that Westlands and other CVP contractors are getting subsidized water. In particular, repayment costs get shifted to users of power produced by CVP facilities.
A report issued in March by the Office of Inspector General of the U.S. Department of the Interior found that USBR is not on track to meet the congressional mandate for recovering the federal investment in the CVP by 2030. The report recommends that USBR 1) change CVP ratesetting policies and implement actions that will ensure stable and predictable repayment and 2) renegotiate the contracts to eliminate refund language.
The trouble is, USBR can’t unilaterally amend water service contracts. And what is the chance that Westlands will agree to a more rigorous repayment schedule just when they’re trying to figure out how to come up with money to build the Peripheral Tunnels? Are these beneficiaries “willing and able to pay their allocated costs for project outputs over the life of the project”?
The report says, “Because of the uncertainty of annual water deliveries and the potential instability of repayment revenues, repayment shortfalls could become significant enough to require political intervention. If this repayment deadline is not met, USBR will not have met its legal mandate and once again will have to put this issue before Congress.”