LOS ANGELES — The Orange County Water District board voted May 14 to approve a water reliability agreement term sheet with Poseidon Water.
Under the contract, Poseidon will provide the water district with 56,000 acre-feet of water annually from a proposed seawater desalination project in Huntington Beach.
"We look forward to working with OCWD over the coming months on the negotiation of the final water purchase contract," Scott Maloni, Vice President of Poseidon Water, said in a prepared statement.
The term sheet establishes the framework and parameters for negotiating a final contract.
It includes a 50-year purchase period with Poseidon assuming the financial responsibility for financing, constructing and operating the desalination facility. Under the term sheet, OCWD only pays for water that is delivered to the specified delivery point, meeting contractual specifications for quantity, quality, reliability and price.
The term sheet links the purchase price of desalinated water to the avoided cost that Orange County would otherwise pay for the imported water that is being replaced. It also includes pricing reviews throughout the contract to ensure the water price OCWD is paying is in line with project costs. Based on the term sheet's pricing structure, it is anticipated that over the life of the contract, Orange County's ratepayers may realize significant savings compared to the purchase of less-reliable imported water, Maloni said.
"The pricing structure requested by the Orange County Water District is fair and equitable," said Maloni. "It provides the ratepayers with the lowest cost water in the early years and price controls on future costs. The agreement protects water agencies and ratepayers from financial risk associated with plant operations, including electricity cost escalation, inflation and changes in law."
Poseidon's project is awaiting discretionary permit approval from the California Coastal Commission to proceed with construction. A hearing is anticipated later this year and construction is expected to begin in 2016. Approval of the Coastal Commission permit is a condition before OCWD will execute a final water purchase agreement.
Poseidon's 50 million-gallon per day seawater desalination project in Carlsbad, Calif. is scheduled to be in operation early this fall.
"As other states are increasingly affected by the drought, California's imported water is in danger of dramatically increasing in cost," said Doug Davert, director of the East Orange County Water District. "That is why our customers are demanding new locally-controlled water supplies, like seawater desalination."
