OfTicCTs 

Hirvc) A. Ilailr). Prcsiden: 

Joan Mahcr, I 'icc' Pr^sldcnf 

Vacant. I Vtv l^esidai: 

SaniK Willart) Dfnn. i "iVaIWsiiUjit 

Vacant, Trtuuurer 

Laurence Mauman. tM."cutivc 

Director 

Board of Dircclon; 

Sanhern /one 

SUke Alvrt 

Kanawha i < (ilide U'C.UT District 

Lancr lUnd 

l^inci ton-Coihia-Clcnn ID 

Da\[d Ccicy 

Bella Visui Wmct District 

Sandy Dcnn 

Tchiima-Cohisa Canal Authority 

Central /one 

Alexander R. Coatc 

East Buy Municipal UiHity District 

Jerry Brown 

Contra Costa Water District 

T ed Costa 

.Sim Jium Waicr District 

Joan Mahcr 

Snntn Clara i alley Water DLstna 

WcMcrn Zone 

Dennis Falaschi 

Pattochc Water District 

Anttiea Hansen 

Del Puerto Water District 

Martin ^Jclnl>Tc 

Snn l.uis Water DLnrici 

Frances MUuno 

S<vt Liih tt DeUtt-Mendota WA 

Southern Zone 

Harvey A. Bailey 

Oranye Cove Priyation District 

David Niton 

Arv'm-lulLwt) Water Storage District 

Ronald I). Jacobsma 

Friant Water Authority 

Fric Limas 

Lower Tuie River hrigation District 

152! "r\Strcct 

Sacramento, CA 95814 

Tele: 916-448-1638 

Fax: 916-i46-i063 

Email: 

Larry: MiatimanfflictptsatCf.org 

May 30, 2014 

Mr. David Murillo 

Mid-Pacific Regional Director 

Bureau of Reclamation, MP-100 

2800 Cottage Way 

Sacramento, CA 95825 

Subject: Central Valley Project Water Association (CVPWA) Concerns Regarding 

the Direction of the Current Centra! Valley Project (CVP) Cost Allocation Study 

(CAS) 

Dear Mr. Murillo: 

The CVPWA has a long liistory of working with Reclamation to collaboratively 

resolve complex, and occasionally contentious issues, affecting CVP water and 

power contractors (Contractors). It is in this spirit that wc write to you today to 

express and share our concerns regarding the ongoing CVP CAS. 

The CVPWA is aware of and recognizes the complexities of the CVP and the 

associated difficulties of undertaking and completing the C VP CAS. We understand 

that there is neither a perfect way to do this study nor a project in all of Reclamation 

to model this study after and that there will be many questions about the assumptions 

made along the way. The CVP is unique in that its constniction period stretches 

from the 1930's to current and the project still hasn't been declared complete. As 

such, it is CVPWA's hope that common sense and business sense will play vital roles 

in dclennining an outcome that is fair and equitable to all concerns. 

As you know, the last detailed CVP cost allocation study was completed in 1970 with 

a minor update in 1975. Since the late 1980"s when water service contracts were 

starting to be renewed, construction and O&M costs have been allocated and annual 

water rates calculated based on the percentages developed in 1975. Since that 1975 

update there have been legislative and operational changes affecting the benefits of 

the CVP. As a result, the current cost allocation is not a fair and equitable reflection 

of the current benefits among each of the project puqMScs. 

It has been CVPWA's bcliefthat when the CVP cost allocation study was updated, it 

would be done in the same manner as prior CVP cost allocations. That is, 

Reclamation would use the Separable Costs Remaining Benefits (SCRB) cost 

allocation methodology and the same practices as used in all prior CVP costs 

allocations to do the new study (which CVTWA would support). 

Unfortunately, we are seeing telltale signs of changes in Reclamation practices that 

arc unexpected, disconcerting and seemingly unjustified to the Contractors. The 

following are some examples: 
Hp-iU„blUf 

201iiJUH-2 Atill:30 
1. In all prior CVP cost allocation studies Reclamation has used a 100 year benefit analysis period, 

using the lesser of the benefits or the Single Purpose Alternative (SPA) to determine the justifiable 

expenditure for each project purpose. Reclamation is proposing to evaluate benefits for only 50 

years to see if initial benefits exceed SPA. This directly contradicts the SCRB cost allocation 

methodology. 

2. In all prior CVP cost allocation studies Reclamation has used a prospective basis when determining 

project benefits. They are now proposing using a historical benefit analysis which would, among 

other things: (a) inappropriately weigh the allocation of costs to project benefits provided in the 

past; (b) diminutively value operational changes that have occurred in the last 25 years; (c) not be 

aligned with current and future operations of the project; (d) be disconnected from future water and 

power rate setting; and (e) slant the SCRB method so that the SPA becomes the justifiable 

expenditure for every project purpose. 

3. In all prior CVP cost allocations, the "base year" was determined to the first year after the 

completion of the cost allocation study. Reclamation has stated that 2010 will be the base year in 

the current study. 

4. Reclamation appears to be leaning toward retroactive application of the current CVP CAS results 

to past constniction and operation and maintenance costs. It's CVPWA's belief that this decision 

would neither make good common nor business sense. Since the late 1980's and in accordance 

with CVP Irrigation and M&I water ratesetting policies, Reclamation has been keeping individual 

contractor accountings and calculating aimual water rates by contractor based on those results. To 

make retroactive adjustments some 26 years later, without advance notification, is just not the right 

thing to do. And while the Reclamation Manual Directives and Standards may state that results 

will be applied retroactively, they are basing that on the assumption that all Reclamation projects 

are generally the same. The CVP is an anomaly and should be exempt from this practice. 

Thank you for your time and consideration of our comments and concerns on this important process. If you 

have any questions regarding these comments, please contact me at 916-448-1638 or 

lhaumaniaicvDwater.org. 

Sincerely, 

Lawrence J. Bauman, Executive Director 

Central Valley Project Water Association 

2 
cc: 

Mr. Jason Phillips 

Deputy Regional Director 

Bureau of Reclamation, MP-115 

2800 Cottage Way 

Sacramento, CA 95825 

Ms. Brenda Bryant 

Assistant Regional Director for Business Services 

Bureau of Reclamation, MP-110 

2800 Cottage Way 

Sacramento, CA 95825 

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