CAP Storage & Recovery in the Tucson AMA

1. CAP Storage & Recovery in the Tucson AMA Preliminary Observations & Policy Options from the Institutional and Policy Advisory Group (IPAG) Informational Briefing AWBA Board Meeting, March 20, 2002

2. IPAG Background • Regional Recharge Plan (1998) • AWBA Facilities Plan for TAMA (1998) • Ongoing examination • Recharge capacity & sites • Kai-Avra proposal (2000) • Subcontract firming • Recovery

3. Analysis • Re-examination of the 1998 Regional Recharge Plan • Much of the report remains valid and useful • Partially outdated due to additional facilities and other factors • Updated analysis • More comprehensive exploration of physical & financial variables • Emphasis on AWBA activities

4. Analytic Tool • Series of linked, interactive spreadsheets • DEMAND by sector & provider • USF & GSF capacities & fees • AWBA funding • & storage • STORAGE by facility, • storer & year • SUMMARY

5. AWBA Spreadsheet Cost of water, cost of storage, 4-cent tax revenue & carryover, withdrawal fees, etc. • “Baseline” Assumptions • Cost of water: CAP advisory • rates through 2007, 3% growth • thereafter • Ad valorem tax: $1.6 million • base, 3% annual growth • Facility charge: flat $12, • based on average cost at TAMA • USFs and 2% GSF Annual & cumulative storage

6. CAP Firming • The AWBA’s firming target for the Tucson AMA will not be met with projected revenue • 200,000+ AF shortfall • (30% below target) • Shortfall reflects • revenue constraints • and cost of credits • Will likely result in • future groundwater • mining

7. Firming Options • Bridging the firming gap {options under consideration} • Lower the cost of credits • Continue to lower water costs • Seek low-cost energy • Continue to lower storage costs at USFs • Spread fixed costs by utilizing available capacity • Increase utilization of TAMA GSFs • Invest in infrastructure to GSFs willing to pay $21/AF • Use Withdrawal Fee money to buy-down the $21 • Lower the AWBA GSF price for the Tucson AMA

8. Firming Options • Bridging the firming gap {options under consideration} • Restructure existing TAMA revenue sources • Extend ad valorem revenue stream • Use Withdrawal Fee money for firming • Other • It is likely that a combination of solutions will be required

9. Firming Options 30% USF; 70% GSF with $4/AF buy-down • Hypothetical Example • Lowering the cost of credits through buy-down • of the $21/AF 80% USF; 20% GSF with $4/AF buy-down “Baseline” 98% USF

10. Ground water flow Operational GSFs Operational USFs Central Arizona Project Service Areas/CC&Ns CAP Recharge Locations Kai-Red Rock CMID Lower Santa Cruz USF BKW Avra USF Clearwater Pima Mine Rd.

11. Recovery • There is strong interest in where water is stored and how it will be recovered • Recovery planning activities • Encourage & participate in dialog with CAWCD, AWBA, ADWR, et al. • Further identify TAMA subcontractors’ recovery needs • Explore the recovery implications of interstate storage

12. Next Steps • Continue to refine analysis • Develop recommendations • Participate in recovery discussions