San Diego’s role as a water broker seems to be growing.
The San Diego County Water Authority just entered into negotiations to sell some of its surplus water to the Moulton Niguel Water District in Orange County, which would pay for supplies produced by the desalination plant in Carlsbad.
The details of any potential deal are a long way off. The water authority board green-lighted the talks just a couple of weeks ago and the Moulton Nigel leaders gave their approval on Thursday.
It’s the second water exchange involving SDCWA over the past few months that signals a new direction for the agency.
For the past two decades, San Diego water managers built supplies through a diverse program of water purchases and infrastructure expansion, including the Claude “Bud” Lewis Carlsbad Desalination Plant, the largest such facility in the Western Hemisphere that makes ocean water drinkable.
While the envy of many other agencies, that water security came at a big cost, resulting in some of the highest consumer rates around. Meanwhile, an unanticipated, if irable, high level of conservation over the years left San Diego with a surplus of expensive water.
Water from the desalination plant is about twice as costly as imported water. Meanwhile, decreased water sales have squeezed the agency’s budget, creating additional pressure to raise rates.
Those pressures will become more intense after the city of San Diego starts receiving water from its sewage recycling system now under construction. The city expects recycled water to meet nearly 50 percent of its needs by 2035, which will reduce its reliance on water authority supplies.
The water authority embarked on a program to unload some of that surplus with the dual aim of modifying, if not rolling back, rate increases, while seeking a more creative approach to the water world in the West that has been bound by arcane law and more than a century of tradition.
Despite consecutive wet winters, experts are still forecasting long-term droughts and water agencies are seeking to bolster their future supplies.
In December, SDCWA entered into an agreement with its former nemesis, the Metropolitan Water District of Southern California, and the Imperial Irrigation District for a water swap designed to keep more water in the still-stressed Lake Mead and save San Diego between $15 million and $20 million.
San Diego’s pact 20 years ago to purchase Colorado River water from IID is the foundation of the plentiful local water supply today and the guidepost for potential future water transfers.
If San Diego and Moulton Niguel come to , it may not happen immediately — the agencies agreed to a three-year negotiating window.
Nor does it guarantee a big windfall for San Diego. Moulton Niguel is a small district, serving 172,000 customers in Laguna Niguel, San Juan Capistrano, Dana Point and nearby communities. By comparison, the water authority’s member agencies serve 3.3 million people.
Nevertheless, San Diego officials believe this kind of water transfer is a big part of the future.
“I think it has to be,” said Dan Denham, general manager of the San Diego County Water Authority. “. . . It’s moving around water where it’s needed.”
Under the proposal, Moulton Niguel would pay for water from the desalination plant, but not get any from it.
The Orange County described this as a “paper water” vs. “wet water” deal. It’s a common practice, but usually doesn’t involve desalinated water. The water wouldn’t be shipped 40-plus miles between the Carlsbad plant and the Moulton Niguel district. The desalinated water Moulton Niguel paid for would still go into San Diego’s supply, while imported water that would have gone to San Diego would go to Moulton Niguel’s customers.
Whether this pencils out to both agencies’ satisfaction is, of course, key to a deal. Moulton Niguel says it maintains the lowest average water bill in southern Orange County. An agreement with San Diego could increase Moulton Niguel’s rates.
But Denham said the transferred water would only be a portion of Moulton Niguel’s supply, meaning that increased costs would be smoothed out over the larger supply.
Further, relying on imported water can be uncertain, both in availability and cost. Like many water agencies, Moulton Niguel had to restrict water use during the recent drought. Joone Kim Lopez, general manager of the Moulton Niguel Water District, told the the price of imported water during a severe drought can increase dramatically.
Defraying some of the costs of water in San Diego would be welcome, regardless of how much or little — particularly from the desalination plant.
The project was controversial from the beginning and remains so today, with critics contending the price of its water, energy consumption and environmental impact are unacceptable. Poseidon Water, a private company, opened the plant in 2015 with an agreement that the authority would purchase a certain amount of water at predetermined prices.
The plant was sold to Aberdeen, a global investment firm, in 2019, according to the water authority. The same 30-year agreement remained in place and, upon its expiration, the authority can buy the plant for $1. The authority has an option to buy the plant sooner — though not for that amount.
Many thought the $1 billion Carlsbad plant would usher in a greater push for desalination. That seemed to be happening, but there have been bumps in the road for some of the same reasons people question the feasibility of the Carlsbad plant.
Amid those concerns and others, the California Coastal Commission rejected a proposed Poseidon plant in Huntington Beach in 2022.
But the commission’s objections didn’t necessarily apply to other desalination projects. Several months later, the commission approved a smaller desalination plant in Dana Point. Gov. Gavin Newsom had made clear that desalination must be part of California’s water alternatives.
The future of the Carlsbad plant may be in flux. Plans are in the works to upgrade the facility to, among other things, reduce its environmental impact and the harm it causes sea life.
(Update: The phrasing of the above paragraph has been reworked since the column was posted.)
The plant will also produce more water, adding 6,000 acre-feet annually to its current 56,000 acre-foot capacity, according to Denham.
Denham said the water authority is now evaluating the plant and its value. Among the options San Diego may consider is selling its interest in the plant to another water agency.
