Water Planning in the Western U.S. Impacts and Opportunities for Investor-Owned Water Utilities

1. Water Planning in the Western U.S.Impacts and Opportunities for Investor-Owned Water Utilities Jeffrey Stuck, Environmental Management Director American Water Western Region July 17, 2007

2. A Critical Junction in the West:Water Scarcity & Increased Demand • Despite winter rains, we are in a long-term drought in the Southwest • Rivers, reservoirs, and snow pack that supply water at record lows • Strong population growth in Southwest (e.g. Colorado River States) • Creativity in water supply must be applied • New technology • Water transfers • Revised water agreements • Creativity in water conservation must be applied • Regulators need to support this creativity, not discourage it or make it burdensome

3. Reduced Water Levels - Lakes Mead and Powell

4. Colorado River – Upper and Lower Basin States Colorado River Water Users Association Website

5. The Water Supply Planning Process • Water supply planning is very complex but at an elemental level consists of three primary steps: • Determining what we need and where we need it • Determining what we have and where we have it • Determining how to address the delta

6. Water Supply Planning – What We Needand Where We Need It • Accurately projecting growth in both water consumption and points of delivery are critical to the water planning process • Per Capita water use • Growth patterns; residential versus commercial/industrial • Physical land condition • Production assumptions • Storage capacity and placement

7. Water Supply Planning – What We Haveand Where We Have It • Accurately accounting for current production capabilities is the next step • Production capacity of each source; service pressure limitations • Source availability limitation; e.g contamination

8. Water Supply Planning – Addressing the Delta • Here is where the planning process gets interesting • The simplest way to address needed capacity is to add more supply…Unfortunately its often not that easy • Items to consider are: • Physical and legal availability of supply • Demand location and associated delivery costs • Current and future infrastructure needs and capabilities • Customer expectations

9. Water Supply Planning – Addressing the Delta • Increasingly water utilities are addressing the “Delta” through creative and innovative approaches • These approaches are met with differing levels of acceptance among consumers and regulators • What will be imperative is that no solution is eliminated from the tool box unless absolutely necessary • The next slides illustrate some of the more progressive approaches to addressing the “Delta”

10. One New Supply Option: Desalination • RO membrane and energy recovery technologies have improved economics • Water production costs becoming competitive with other sources of “new” water • American Water desalination project involvement • Florida: Tampa Bay Water • Hawaii: Kaupelehu Brackish Plant • California: Coastal Water Project

11. Tampa Bay Sea Water Reverse Osmosis Plant

12. Kaupalehu Brackish Water Reverse Osmosis Plant

13. Other New Water Supply Options • Water transfers between agricultural and municipal uses • Water transfers between geographic regions • Water exchanges – surface water for ground water • Intentionally Created Surpluses (ICS) • Aquifer Storage and Recovery (ASR) • Reuse • Water rights leases from Indian nations • Conservation

14. Imperial Irrigation District / San Diego County Water Authority – Water Transfer • Involves wheeling water from Imperial County to San Diego County • Combines aquifer lining, improved farming and other conservation with transfer of water to urban area • Augments San Diego supply while offering some independence

15. Water Exchanges – Using Surface Water on Golf Courses in Lieu of Groundwater

16. Intentionally Created Surplus – Creative Water Conversation On The Colorado River - Increasing Your Share • Intentionally Created Surplus (ICS) • This will be facilitated by agreements that allow parties to assist one another with conservation and efficiencies through capital expenditures and other means to increase size of allotment • This process is still under development but some of the elements are exercised currently

17. Aquifer Storage and Recovery – Water Banking • An innovative approach to water supply management • Only the amount of water stored in the aquifer is removed • No groundwater mining occurs and thus the issues associated with groundwater over drafting are avoided. • There are some issues however: • Source of recharge – reclaimed versus fresh

18. Water Reuse – Offsetting The Need For Fresh Water Supplies • American Water Anthem Water Campus – Arizona • Membrane bioreactor technology • A+ quality treated effluent • Master planned community where reuse was considered at inception • Golf courses, green belts, man made lakes, and parks receive reclaimed water thereby offsetting the demand on scarce fresh water supplies

19. Settlement of Indian Water Rights Claims Resolution of outstanding Indian water rights claims is critical before water rights claims of non-Indian interests’ can be resolved • Gila River Indian Community Water Rights Settlement Act: • Various Indian nations claim over 650,000 AF of water per year of Colorado River is resolved (47% of CAP canal annual flow) • Approved by Congress in late 2004 • Navajo Nation Water Rights Settlement Agreement: • Navajo Nation settlement includes rights to over 600,000 AF of water from the San Juan River Basin • Pending before Congress

20. Federal, State & Local Regulation Regulated water companies, like municipal providers, must focus on conservation. Regulation can and will help: • Federal – U.S. Bureau of Reclamation requires water use efficiency programs for use of federal reclamation project water • State – Arizona Groundwater Management Act & California Urban Water Management Plans set targets and guidelines for water use • Local – Certain local water management districts have specific conservation programs or water use limitations

21. New State Legislation in Response to Water Shortages • Arizona –Water bills introduced to extend into rural Arizona, requiring100-year assured water supply for new subdivision • California – SB 610 and SB 221 (2001) require a minimum 20-year supply of water for developments of 500+ • New Mexico – the State Engineer has proposed decreasing allowable pumping for private domestic wells from 3 AF to 1 AF/year • Colorado – HB 1177 would create a legal framework for regulating inter-basin water transfers within the state

22. Summary • Regulated water companies and regulatory commissions must undertake innovative approaches in light of increased competition for limited water supplies • Water rights transfers, desalination, water exchanges, and water use efficiencies must all be utilized • New regulatory constructs will be necessary in order to compete with public suppliers for water and to encourage conservation • A long range view and cooperative approaches are both necessary to successfully address complicated and emotional issues surrounding water in the arid West • Investor owned utilities are ready to partner with regulators to meet these challenges