Orange County Water District Approves Term Sheet for Desalinated Water

May 18, 2015
The agreement allows the district to secure 56,000 acre-ft of water annually from the Huntington Beach Desalination Project

The Orange County (Calif.) Water District (OCWD) board of directors voted to approve a Water Reliability Agreement term sheet with Poseidon Water that will allow OCWD to secure the single largest source of new, local water supply available to Orange County—56,000 acre-ft of water annually from the proposed seawater desalination project in Huntington Beach.

“Today’s action by the Orange County Water District Board moves the county another step closer to securing a new, drought-proof water supply that will further the county’s water independence,” said Scott Maloni, vice president of Poseidon Water. “We look forward to working with OCWD over the coming months on the negotiation of the final water purchase contract.”

The Water Reliability Agreement term sheet between Poseidon Water and OCWD, for the Huntington Beach Desalination Project, establishes the framework and parameters for negotiating a final contract. The term sheet 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 contemplates 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.

“The pricing structure requested by the Orange County Water District is fair and equitable,” Maloni said. “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 Huntington Beach Desalination Project is awaiting discretionary permit approval from the California Coastal Commission to proceed with construction. A hearing before the Coastal Commission is anticipated later this year and commencement of construction is expected in 2016. Approval of the Coastal Commission permit is a condition precedent for OCWD to execute a final water purchase agreement.

Source: Poseidon Water