Foreword

The final Central Valley Project (CVP) water rates for contract year (CY) 2017 and the final 

CVP annual contractor accountings for fiscal year (FY) 2015 have been posted to the Bureau of 

Reclamation website.

The final water rates and final annual contractor accountings for the years 2004 through 2017 

can be found at www.usbr.gov/mp/cvpwaterrates/ratebooks/index.html. 

If you have any questions or need additional information, please contact Mr. Jesus Reynoso at 

916-978-5362, or by e-mail at jreynoso@usbr.gov.

Site Security Costs

Projected costs for security guards and patrols for FY 2017 are included in the water rates. The 

estimated total projected costs for Irrigation and M&I are $3,601,143 and $547,058 respectively. 

Trinity Public Utility District (TPUD) Assessment

In accordance with Public Law 106-377, Section 203, Reclamation is required to collect annually 

$162,000 (indexed) for payment to the Trinity Public Utility District. For the period March 2017 

through February 2018 the TPUD rate will be $0.30 per Acre-Foot. This assessment along with 

the CVP Restoration Fund charges and Friant surcharges are due within 30 days after the 

delivery of water.

Water Marketing

Water marketing costs included in the CVP water rates include general expense. For 2017, the 

budgeted costs were $3,485,000 and those allocated to irrigation and M&I were estimated at 

$1,598,668 and $128,717 respectively. 

Project Use Energy (PUE) Costs for FY 2015 Accountings

The PUE costs included in the FY 2015 annual CVP contractor accountings are based on 

estimated costs. This years’ contractor accountings also includes a true-up of FY 2014 PUE 

costs. The breakdown of the PUE expenses are shown below: 

Estimated PUE Costs for FY 2015 $23,400,000 

FY 2014 PUE True-up adjustment ($3,727,539) 

Total Irrigation and M&I PUE Expenses in FY 2015 $19,672,461 

Increase in Project Use Energy (PUE) Costs

Due to the expiration of Reclamation’s contract with PG&E on April 1, 2016, PUE costs are 

projected to increase. In fiscal year 2017, the increase is projected to be approximately $6.9 

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million and is included in the 2017 water rates. In future years, the annual increase is anticipated 

to be $8 to $10 million per year.

CVP Cost Recovery Improvement

Based on the results of a 2013 audit conducted by the Office of the Inspector General, a 

recommendation was made for Reclamation to improve the current rate setting practices to better 

recover CVP construction costs on an annual basis. Reclamation worked collaboratively with 

stakeholders to develop a revised process for projecting future water deliveries that serve as the 

basis for estimating water rates. Beginning with the 2016 Water Rates, the new practice for 

projecting future water deliveries include:

• Using a 7- year average of historical water deliveries as the basis for projecting future

deliveries for calculating the irrigation and M&I operation and maintenance (O&M)

component of the water rate.

o Depending on whether or not reservoir levels are below normal, the 7 year average of

water deliveries could be further reduced based on specific criteria.

 For the 2017 Water Rates, since Shasta Reservoir levels were not below average

at August 2016, further reductions were not considered based on this criteria.

 In consultation with our Central Valley Operations Office, their interpretation of a

likely outcome was that the water deliveries for the CVP in FY 2017 were most

likely less than 20 percent of the 7-year average. As a result, Reclamation will

continue to use a 20 percent reduction to the 7-year average for calculating O&M

rates for the 2017 Water Year.

• Using a 7-year average of historical water deliveries as the basis for projecting future

deliveries for calculating the irrigation and M&I construction component of the water

rate. There is no further reduction to deliveries based on lower than normal reservoir

levels.

Exception: If a contractor has taken water 3 times or less in a 7 – year period, Reclamation 

will use the higher of the 7 year average or 14% of the contractor’s contract entitlement.

For more information regarding improved Ratesetting practices, please visit the Reclamation 

website at http://www.usbr.gov/mp/cvpwaterrates/wtr_ctr_notices/2015/ to review the decision 

paper that was posted in April 2015. 

Note: For the 2017 Water Rates: M&I Schedule A-13 and A-14 have been combined as 

Schedule A-13; M&I Schedule A-15 is now Schedule A-14. 

Extraordinary Operation and Maintenance (XO&M) Cost

CVP XO&M costs are included in the current year CVP water rates along with annual O&M 

costs. While Public Law 111-11 provides Reclamation the authority to offer extended repayment 

of XO&M costs through the use of repayment contracts; the Mid-Pacific Region is still in the 

process of drafting a basis of negotiation to seek approval from the Commissioner to allow for 

the extended repayment of XO&M cost through the use of existing water service contracts. 

Reclamation and stakeholders are working collaboratively to develop a process for the extended 

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repayment of XO&M costs through the water rate process. The following tables show the 

estimated and actual XO&M costs for the period 2009 through 2017 for both irrigation and M&I. 

Irrigation Extraordinary Operations and Maintenance Costs (XO&M)

Fiscal Year Estimated Cost Actual Cost Variance

2009 $0 $4,192,153 $(4,192,153)

2010 $0 $3,451,716 $(3,451,716)

2011 $0 $3,385,405 $(3,385,405)

2012 $2,016,701 $3,466,279 $(1,449,578)

2013 $2,166,051 $2,088,288 $77,763

2014 $2,208,368 $3,336,697 $(1,128,329)

2015 $2,862,681 $2,610,238 $252,443

2016 $3,515,700 TBD $3,515,700

2017 $5,516,875 TBD $5,516,875

Total $18,286,376 $22,530,777 $(4,244,401)

M&I Extraordinary Operations and Maintenance Costs (XO&M)

Fiscal Year Estimated Cost Actual Cost Variance

2009 $0 $510,567 $(510,567) 

2010 $0 $495,409 $(495,409) 

2011 $0 $391,926 $(391,926) 

2012 $253,151 $518,316 $(265,165) 

2013 $317,704 $361,150 $(43,446)

2014 $327,031 $623,990 $(296,959) 

2015 $417,859 $418,594 $(735)

2016 $1,705,800 TBD $(1,705,805)

2017 $2,136,706 TBD $(2,136,706)

Total $5,158,251 $3,319,952 $(1,838,299)

Water Marketing Cost Associated with Suisun Marsh

In the 2015 Accounting period, Reclamation included costs for Suisun Marsh that were for prior 

periods. Deliveries for the years 2013 and 2014 were used to pro-rate costs associated with the 

Suisun Marsh in those years. Normally, annual accounting costs are for and allocated based on 

the costs and deliveries posted in a fiscal year. However, with Suisun Marsh, invoices were not 

submitted for payment in the appropriate Accounting period. All payments were made on 

invoices in 2015; Therefore, costs were posted in 2015 for Suisun Marsh that occurred in 2013 

and 2014. 

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Federal Investments

Provided is the CVP Construction Allocation by Function and the Repayment through 

September 30, 2015 identifiable to irrigation and M&I:

Construction Cost Allocation by Function through FY 2015

Function Allocation Repayment Unpaid % Repaid

Water Service:

Irrigation $1,173,420,705 $526,093,984 $593,453,503 44.83%

M&I $117,749,201 $112,931,848 $4,817,353 95.91%

Other Purposes:

Commercial Power $820,271,874

Federal Taxpayer $815,464,397

State of California $336,700,541

Capital Relief Assigned (ATP) $53,873,218

Local Entities $261,400

Total $3,317,741,336

Based on the new method to determine the estimated deliveries (see cost recovery improvement 

section), Reclamation anticipates improved construction repayment starting with the 2016 Water 

Year. Provided is a summary of repayment by year.

Year

Actual IRR 

Construction Recovery

Projected Annual 

Average Construction 

Recover Variance (Over/Under)

2003 $19,608,499 $37,051,890 $(17,443,391)

2004 $23,341,327 $37,404,088 $(14,062,761)

2005 $20,753,048 $38,527,038 $(17,773,990)

2006 $28,322,351 $39,211,192 $(10,888,841)

2007 $23,197,478 $39,610,443 $(16,412,965)

2008 $11,754,668 $41,578,408 $(29,823,740)

2009 $3,401,428 $31,640,202 $(28,238,774)

2010 $13,878,181 $33,202,989 $(19,324,808)

2011 $26,910,984 $34,695,494 $ (7,784,510)

2012 $19,767,532 $35,113,081 $(15,345,549)

2013 $10,735,953 $34,987,828 $(24,251,875)

2014 $1,280,730 $36,864,266 $(35,583,536)

2015 $0 $37,174,567 $(37,237,642)

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Significant impacts from Draft Rates to Final Rates

Project Use Energy (PUE) Cost

At the Financial Affairs Committee (FAC) Meeting on November 20, 2015, the Bureau of 

Reclamation proposed removing Project Use Energy (PUE) charges from the Central Valley 

Project (CVP) water rates due to Reclamation’s inability to continue to record the PUE charges 

as revenue. The PUE charges that are collected through the CVP water rates is revenue that 

belongs to Western Area Power Administration. In the current Ratesetting process, PUE is 

included in the water rates along with CVP O&M costs, and when payment is remitted (CVP 

water rate x acre feet) the entire amount is recorded as revenue. 

Water contractors requested that Reclamation continue to collect PUE charges through the 

Ratesetting process. To prevent recording the PUE charges as revenue in the future, a proposal 

was made that the PUE charges be paid separately by a few select contractors. These few 

contractors (identified below) graciously accepted Reclamation’s proposal and agreed to pay 

direct pumping PUE and storage PUE costs in advance, on behalf of all CVP contractors, as part 

of their CVP water rates. The impact to these contractors is only in how they will remit their 

water payments in the future. Their water payments will separately identify direct pumping PUE 

and “other” PUE as components of their cost of service rate. The “other” PUE component is 

specifically to identify the amount of PUE charges that are being paid on behalf of other 

contractors, and in which a like credit will be given to offset the O&M component of their water 

rate. Overall, contractors’ cost of service water rates will remain the same. This proposed future 

process for PUE will allow Reclamation to easily identify PUE revenue and deposit it to a 

separate account for payment to Western Area Power Administration. 

The select few contractors are: 

1. Westlands Water District (Irrigation, M&I)

2. Santa Clara Water District (Irrigation, M&I)

3. San Benito Water District (Irrigation, M&I)

4. Colusa County Water District (Irrigation, M&I)

5. Kanawha Water District (Irrigation, M&I)

6. Orland Artois Water District (Irrigation)

7. San Luis Water District (Irrigation, M&I)

8. Contra Costa WD (M&I)

Other contractors will still pay their share of Project Use Energy for Storage and Direct Pumping 

as offset revenue, rates developed for this purpose, to cover the credit in O&M the 8 contractors 

will receive for paying on their behalf.
CVP Cost Allocation Study

CVP Cost Allocation Study Cost has been included annually in the Water Marketing cost 

component. The following table includes the total amount of which a share is recovered through 

the Water Marketing O&M. For the final 2017 Water Rates, refer to Schedule A-9 for both 

Irrigation and M&I. 

Fiscal Year Estimated Cost Actual Cost Variance

2010 $750,886 $433,553 $317,333

2011 $700,000 $665,700 $34,300

2012 $700,000 $390,000 $310,000

2013 $740,091 $487,197 $252,894

2014 $2,120,635 $848,450 $1,272,185

2015 $1,797,383 $1,031,142 $766,241

2016 $1,416,525 TBD $1,416,525

2017 $1,000,000 TBD $1,000,000

Full Cost Water Rates

The practice for calculating estimated deliveries for setting FC water rates has been 

improved for 2017 in order to be consistent with how deliveries are estimated for Cost of 

Service (COS) water rates. Previous calculations of FC water rates used estimated deliveries 

at contract entitlement without adjustment. For 2017 and forward, historical (1981 to 

present) and projected deliveries that are used to pro-rate construction cost by contractor for 

COS water rates will also be used for calculating FC water rates. Reclamation will still 

amortize construction costs over a 50 year period and use the weighted interest rates as 

required by the Reclamation Reform Act. The annualized construction amount by contractor 

will then be developed into a FC water rate. To develop the rate Reclamation will use the 

improved practice for estimating deliveries established in 2016 which uses a 7 year average. 

This brings the FC water rates up to date in its calculation and in line with the Reclamation 

Reform Act legislation while also incorporating consistent practices in the calculation of 

both FC and COS water rates.

Note that the components for the COS water rates and the FC water rates are the same, with 

the only exception being that interest is added to CVP construction for the FC water rates.

COS Water Rates Components: Annual O&M, O&M Deficit, Interest on O&M Deficit, 

and Construction

FC Water Rate Components: Annual O&M, O&M Deficit, Interest on O&M Deficit, 

Construction, and Interest on Construction

Questions

Please direct any questions regarding the CVP 2017 final water rates or the CVP 2015 annual

contractor accountings to Mr. Jesus Reynoso at 916-978-5362, or by email to

jreynoso@usbr.gov.

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