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Foreword

The final Central Valley Project (CVP) water rates for contract year (CY) 2021 and the final CVP 

annual contractor accountings for fiscal year (FY) 2019 have been posted to the Bureau of 

Reclamation website. 

The final water rates and final annual contractor accountings for the years 2004 through 2021 can be 

found at https://www.usbr.gov/mp/cvpwaterrates/ratebooks/index.html. 

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

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

Ability to Pay Studies

Certain Sacramento River settlement contractors have Ability-to-Pay (ATP) relief that expired on 

March 30, 2019, and a new study has not been completed. In the interim, the water rates for these 

contractors are based on the results of the expired study as presented in Schedule A-1. Once a new 

ATP study is completed, any changes to the Sacramento River Settlement Water contractor’s water 

rates and CVPIA Restoration Fund charges will be communicated to affected contractors and 

incorporated into water rates; however, the results of the forthcoming ATP study will be applied 

over the entire period of analysis (April 1, 2019 to March 30, 2024).

In addition, Sutter MWC, Natomas Central MWC and Pelger MWC have ATP relief that expire on 

March 31, 2021. Until a new study is completed, the water rates for these contractors are based on 

the results of the previous study as presented in Schedule A-1. Once a new ATP study is completed, 

any changes to Sutter MWC, Natomas Central MWC, and Pelger MWC’s water rates and CVPIA 

Restoration Fund charges will be communicated to affected contractors and incorporated into 

water rates; however, the results of the forthcoming ATP study will be applied over the entire period 

of analysis (April 1, 2021 to March 30, 2026).

Many CVP water contractors are utilizing provisions of WIIN 4006 to convert their water service 

contracts to repayment contracts and prepay their outstanding construction obligations. When the 

contracts are signed, the contractor makes an agreement to execute the contract with the 

understanding that the construction will be paid under a 9d contract and as such there will not be 

applicable rates for construction and there would be no associated ATP relief for the intended 

repayment per PEC TRMR--122.
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CVP Final Cost Allocation - Implementation

The Final CVP Cost Allocation (FCA) was completed in January 2020 and has been incorporated in 

the plant-in-service and O&M cost allocations that are used in the water ratesetting process. The 

FCA is based on both historic and current operations of the CVP using a two-period two cost 

allocation methodology, and the resulting cost allocation factors are used to allocate the construction 

costs of CVP facilities and also incorporated in the allocation of projected OM&R costs. As this is 

the first year of implementing the FCA into CVP water rates, there are instances of substantial shifts 

in costs relative to previous years, which were based on the interim cost allocation updated most 

recently in 1975. However, in addition to the FCA, there are other factors that affect the allocation 

of costs across project beneficiaries year over year, primarily new costs that have been incurred in 

the CVP (and their associated purpose) and shifts in project operations (i.e., water deliveries and 

hydropower generation) that are used to true-up the cost allocation over time. As a result, it is 

difficult to isolate the role of the FCA on water rates, but some general observations can be made.

The effect of the FCA on CVP water rates can be viewed across cost pools and the distribution of 

water supply costs between irrigation and M&I water users. For construction costs, the effect on 

cost pools is driven by changes in facility-level cost allocations, where the cost of each facility is first 

allocated among the authorized purposes of the CVP, including water supply, which in turn is suballocated based on use of the water and assigned to a particular cost pool depending on the 

characteristics of each facility. Similarly, O&M costs are allocated individually and assigned to an 

applicable cost pool.

For the construction component of 2021 water rates (which is based on the FY-19 plant-in-service 

allocation), the following costs pools realized a decrease in water costs: Storage, Conveyance, and 

Conveyance Pumping, as well as Project Use Energy costs. Conversely, water costs in the Other cost 

pool increased. Costs were stable in the Direct Pumping and San Luis Drain cost pools, which are 

unaffected by the FCA. The cumulative effect is a decline of $40.9 million in construction costs 

allocated to water users in the CVP. However, when evaluated from the perspective of project 

beneficiaries, irrigation water users experienced a decline in allocated costs, while M&I users realized 

an increase in costs. This disparity among water users is attributed to relatively higher water 

deliveries to M&I contractors compared to irrigation contractors under current and prospective 

operations of the CVP.

The allocation of projected O&M costs follows similar patterns across cost pools and water users, 

although it is less dependent on the FCA because many O&M costs are allocated based on 

Reclamation policy and applicable laws and legislation. Overall, allocated O&M costs increased for 

both irrigation and M&I water users, primarily due to the increase in total O&M costs in the CVP. 

The relative increase is higher for M&I users (compared to irrigation users) similar to construction 

costs.

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

component. The following table includes the total amount of which a share is recovered through 
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the Water Marketing O&M. Since the study is considered complete, there will not be an estimate 

for the 2021 Water Rates.

Fiscal Year Estimated Cost Actual Cost

Difference 

(Over)/Under

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 $1,005,766 $410,759

2017 $1,000,000 $1,325,757 $(325,757)

2018 $1,000,000 $751,676 $248,323

2019 $1,000,000 $420,426 $579,574

2020 $ 500,000 TBD TBD

2021 $ 0 TBD TBD

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 continues to work collaboratively 

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

basis for estimating water rates. 

The process to estimate deliveries for setting O&M water rates has been improved from the original 

process included for the 2016 Water Rates. The new process provides more flexibility in the 

determination of the deliveries for setting O&M water rates. A decision document is to be updated 

and included in the water contractor notices section of the Reclamation website at 

http://www.usbr.gov/mp/cvpwaterrates/wtr_ctr_notices/. Provided is the improved process:

O&M

1. Consider using the 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. 

a. 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.

2. Consult with Central Valley Operations Office to see if this average is appropriate for the 

calculation of the water rates.

3. If CVO recommends considering an alternative to the 7-year average due to their estimate 

being considerably different, consider using an alternative approach.

In consultation with our Central Valley Operations Office, the interpretation is that it is appropriate 

for M&I and irrigation estimated deliveries to use a 7-year average for 2021. 
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Construction 

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. 

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 (enacted March 30, 2009) 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 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 2021 for both 

Irrigation and M&I. These are cost that specifically have been identified to be recovered as O&M. 

There will be a further review of our Financial Statement to determine if there is a repayment 

adjustment for Plant in Service cost that have historically been included as capitalized cost and 

recovered as part of the Plant but need to be considered for cost recovery as O&M. This review is 

planned for the fiscal year 2021 and 2022 years (fiscal year is October through September). As this 

process proceeds, it will be discussed with the Financial Affairs Committee and further informed to 

water users through the Financial Management Division California Great Basin, Bureau of 

Reclamation WEB site.

Irrigation Extraordinary Operations and Maintenance Costs (XO&M)

Fiscal Year Estimated Cost Actual Cost Variance

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

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

2011 - $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 $4,857,366 $(1,341,666)

2017 $5,516,875 $1,238,095 $4,278,780

2018 $6,236,549 $196,538 $6,040,011

2019 $6,118,000 $7,745,741 $(1,627,741)

2020 $8,432,204 TBD TBD

2021 $8,216,208 TBD TBD
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M&I Extraordinary Operations and Maintenance Costs (XO&M)

Fiscal Year Estimated Cost Actual Cost Variance 

2009 - $510,567 $(510,567)

2010 - $495,409 $(495,409)

2011 - $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 $923,456 $782,344

2017 $2,136,706 $169,622 $1,967,085

2018 $890,154 $85,023 $805,131

2019 $795,720 $4,084,412 $(3,288,692)

2020 $1,236,940 TBD TBD

2021 $4,370,769 TBD TBD

Interest during Construction & Interests on Investment Adjustment 

 

Per FIN 07-21, when construction of the project is determined to be substantially complete, a Final Cost

Allocation (FCA) is required. The Central Valley Project FCA study was completed and finalized in

January 2020, hence per FIN 07-21, requires Reclamation to adjust Interest during Construction (IDC)

on CVP facilities. Once IDC is adjusted, we will recalculate Interest on Investment (IOI) as required per

FIN 06-32. Reclamation is currently working internally on these topics and as we have more

information to share, we will communicate with stakeholders.

Federal Investments 

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

September 30, 2019, identifiable to Irrigation and M&I. These cost take into account the 

implementation of the Final Cost Allocation Study.
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Construction Cost Allocation by Function thru FY 2019 (excludes DMC Intertie)

Function Allocation Repayment Unpaid % Repaid

Water Service

Irrigation $1,126,674,307 $818,259,733* $308,414,569 72.63%

M&I $148,654,230 $124,836,395 $23,817,835 83.98%

Other Purposes

Commercial Power $906,336,013

Federal Taxpayer $1,164,662,068

State of California $255,989,917

Local Entities $261,400

$3,602,577,935

*Ability to pay relief is included as repayment in the amount of $64,620,853. 

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. In order for improved recovery, the estimated deliveries for setting O&M and construction 

rates have to be lower than or equal to the actual deliveries. Included is a summary of the Fiscal Year 

2016 deliveries forward for irrigation and the summary of irrigation construction repayment by year.

Year

Actual IRR Deliveries 

in Acre-Feet

Projected Irrigation 

Deliveries in AcreFeetDifference 

(Over)/Under

O&M

2016 1,087,556 1,549,749 (462,193)

2017 2,295,294 2,574,135 (278,841) 

2018 2,543,787 1,920,756 623,031

2019 2,861,259 1,713,135 1,148,124

2020 TBD 1,928,932 TBD

2021 TBD 1,616,424

Construction

2016 1,087,556 1,949,621 (862,065)

2017 2,295,294 1,545,547 749,747

2018 2,543,787 1,607,776 936,011

2019 2,861,259 1,552,257 1,309,002

2020 TBD 1,529,480 TBD

2021 TBD 1616,424
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Year

Actual IRR 

Construction 

Recovery

Projected Annual 

Average 

Construction 

Recovery

Difference 

(Over)/Under

2003 $17,053,906 $37,051,890 $(19,997,984)

2004 $21,751,380 $37,404,088 $(15,652,708)

2005 $18,070,693 $38,527,038 $(20,456,345)

2006 $24,305,293 $39,211,192 $(14,905,899)

2007 $19,598,561 $39,610,443 $(20,011,882)

2008 $14,194,121 $41,578,408 $(27,384,287)

2009 $4,251,593 $31,640,202 $(27,388,609)

2010 $14,877,772 $33,202,989 $(18,325,217)

2011 $25,444,957 $34,695,494 $(9,250,537)

2012 $19,365,287 $35,113,081 $(15,747,794)

2013 $13,781,066 $34,987,828 $(21,206,762)

2014 $4,229,536 $36,864,266 $(32,634,730)

2015 $2,631,789 $37,174,567 $(34,542,781)

2016 $5,695,535 $39,328,648 $(33,633,113)

2017 $60,544,218 $42,253,883 $18,290,335

2018 $94,243,950 $46,218,850 $48,025,100

2019 $80,983,138 $44,719,334 $36,263,804

Folsom-South Canal 

The Folsom-South Canal costs have been reclassified from construction in abeyance to Plant-inService. For repayment purposes, the Operation and Maintenance costs and the Construction costs 

are being reviewed by the Bureau of Reclamation. For 2019 M&I O&M and the 2021 M&I 

Construction and O&M Water Rates, the Folsom-South Canal costs were identified 16.4% as 

recoverable. 

Full Cost (FC) Water Rates 

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

2017 and forward years 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 FC construction 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 
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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 Rate Components FC Water Rate Components 

Annual O&M Annual O&M

O&M Deficit O&M Deficit

Interest on O&M Deficit Interest on O&M Deficit

Construction Construction

Interest on Construction

Friant Surcharge and Associated Water Rate Offset 

Public Law 111-11, Title X, provides a provision for Friant Division water contractors to receive a 

temporary reprieve in their Friant Surcharge if the Secretary of the Interior does not need those 

funds for the ongoing federal costs of the San Joaquin River Restoration Settlement Act Program 

(Program). The Public Law identifies that this could occur in Fiscal Year (FY) 2020. However, 

Reclamation has determined that for FY 2020 and FY 2021 the surcharge should not be reduced as 

it is necessary for the Program. Since Reclamation will include the surcharge at a rate of $7.00 per 

acre-foot, and not reduce the rate (up to a $3.00 reduction), Reclamation will offset Water Marketing 

for the Friant Division contractors to the extent allowed by the Federal law. Please refer to 

Schedules A-8, A-2A, and A-1 of the water rate books to identify the offset.

Project Use Energy (PUE) Costs for FY 2019 Accountings 

The PUE costs included in the FY 2019 annual CVP contractor accountings process are based on 

estimated costs. These costs are for Reclamations routine O&M costs and Western Area Power 

Administration Transmission related costs and do not include Reclamations extra ordinary O&M 

costs (XM) which are handled separate and recovered solely by Reclamation. This year’s contractor 

accountings also includes a true-up of FY 2018 PUE costs. The breakdown of the PUE expenses are 

shown below: 

Estimated PUE Costs for FY 2019 $35,006,106

FY 2018 PUE True-up Adjustment $285,981

Total Irrigation and M&I PUE Expenses in FY 2019 $35,292,087

2019 XM PUE Recovered by Reclamation $3,595,619

Increase in Project Use Energy (PUE) Costs 

Due to the expiration of Reclamation’s contract with PG&E on April 1, 2016, PUE costs have increased. In fiscal 

year 2021, there will be costs projected to be approximately $14.4 million and are included in the 2021 water rates 
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Project Use Energy (PUE) O&M Cost in the Water Rates 

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 select few contractors. These select 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. Westland’s 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.

Site Security Costs 

Projected costs for security guards and patrols for FY 2021 are included in the water rates. The 

estimated total projected costs for Irrigation and M&I are $2,984,692 and $581,099 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 2021
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through February 2022 the TPUD rate will be $0.15 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 2021, the 

budgeted costs were $684,000 and those allocated to Irrigation and M&I were estimated at $388,278

and $61,918, respectively.

WIIN Act Repayment Contracts 

Public Law 114-322, Section 4011 directs that upon request of the contractor, certain water service 

contract(s) shall be converted to repayment contract(s). As part of this process, the requesting 

contractor(s) will enter into an amended or integrated form of contract which includes among other 

things repayment of construction balances that are properly assignable to the contractor and in 

effect at the time of contract conversion. Once the contract is converted, the water rates will be 

updated under the amended contract for the month following the execution date to exclude the 

construction component of the water rate. Note that the Rates that were in effect as of January 1st 

are included in the water rate website. A separate schedule will be developed and updated for the 

contractors that convert after January 1st, 2020. This Schedule will be posted as an update each 

quarter (i.e., April 1st, July 1st, and October 1st) with the first month the new rates are applicable. 

This schedule will be posted on this site and identified as rates for WIIN Act contract conversions. 

Questions 

Please direct any questions regarding the CVP 2021 final water rates or the CVP 2019 annual 

contractor accountings to Jesus Reynoso at 916-978-5362 or by email at jreynoso@usbr.gov.