Municipal & Industrial 

Ratesetting Policy 

Workshop
Agenda 

• Timeline to Finalize the M&I Ratesetting Policy 

• Recap of Previous Workshop 

– Comments Received and Responses 

• Additional Proposed Changes to Policy 

• Next Steps 

• Questions and Answers 
Timeline to Finalize the M&I 

Ratesetting Policy 

• Workshop June 23rd, 2014 

• Comments July 23rd, 2014 

• Responses to Comments September 2014 

• Refinement Period Oct 2014 – Dec 2014 

• Submit for Finalization January 2015 
Recap of Previous Workshop 

• Policy Narrative and Illustrative Tables 

– Narrative changes can be identified through track changes 

– Tables have been removed 

• We would like to provide most current information 

• This information can be found through the Ratebooks posted 

on the WEB 

– http://www.usbr.gov/mp/cvp/laws.html 

» Ratesetting/Ratebooks 
Recap of Previous Workshop 

Continuation 

• Revenue Application 

– Surplus revenue to Construction and Deficits concurrently 

• This has been retracted 

• Minimum $15.00 Rate 

– No minimum rate 

• Update to Definitions 

– Changes Reclamation anticipates making will be included in 

the draft Policy. 
Comments and Responses 

Section of 

Policy Comment Response

Attributes of 

the M&I 

Ratesetting

Policy

See Pg. 10

Recommend that the order of repayment 

should be consistent with the Irrigation 

Ratesetting Policy in the following order: 

1. Current Year O&M 

2. Interest Expense 

3. Interest Bearing O&M Deficit 

4. Capital Repayment 

Concur
Comments and Responses 

Continuation 

Section of Policy Comment Response 

New Section –

Legislation and 

Changes

See Pg. 7

Recommend that the final 

policy honor the March 3, 

2005 Settlement of the CVP 

M&I Ratesetting Lawsuit. 

Section includes Settlement 

Agreement.

We will make reference to 

section 3(A)(2) through (5) of 

the settlement as it relates to 

interest cost. 

Part of the Settlement 

identified annual unpaid 

construction interest through 

1985 and unpaid O&M 

through 1985 to be at 0% 

interest. 
Comments and Responses 

Continuation 

Section of 

Policy Comment Response 

Minimum M&I 

Water Rate

See Pg. 16

The current Interim policy’s $15.00 

minimum rate should be eliminated as 

most M&I contractors are now paying 

annually adjusted Cost of Service Water 

Rates. 

Draft Policy 

excludes a 

minimum rate.
Comments and Responses 

Continuation 

Section of 

Policy Comment Response 

Glossary - Deficit 

Definition

See Pg. 24

Recommend that the 

proposed definition be 

consistent with the provisions 

in the March 3, 2005 

Settlement of the CVP M&I 

Ratesetting Lawsuit. 

First Sentence of the Deficit

Definition in the interim Policy 

is in line with the settlement 

agreement.

Second sentence will be 

deleted.

Deleted: The Project’s M&I 

water supply account has a 

deficit balance, and the deficit 

has been increasing every 

year. The deficit has increased 

because revenues have not 

covered all the operating costs.
Comments and Responses 

Continuation 

Section of Policy Comment Response 

Glossary – Historical 

and Projected Water 

Deliveries

See Pg. 24

1. Does RRA Section 215 water 

meet the applicable definition(s) 

as shown in the update, and , if 

it doesn’t, recommend that the 

definition(s) be adjusted 

accordingly. 

2. Will RRA Section 215 water be 

included in the historical and 

projected deliveries for cost 

allocation and cost proration by 

contractor calculations. 

215 water will be 

addressed in a 

separate Business 

Practice Guideline.
Comments and Responses 

Continuation 

Section of 

Policy Comment Response 

Glossary –

Long-Term 

Contractor

See Pg. 24

What is the basis of “having a term of 

greater than 10 years”?

There isn’t concurrence with Reclamation 

that a long-term contractor should be 

limited to a contractor who is “receiving 

water”. A given Contractor should not be 

excluded from this definition because that 

contractor is not regularly taking water.

The D&S WTR PEC 08 

defines long-term as in 

excess of 10 years (source 

of definition is USC 485h) 

Concur. The reference “on 

a regular basis” will be 

removed from the 

definition. 
Comments and Responses 

Continuation 

Section 

of Policy

Comment Response 

Glossary –

Paid Water

See Pg. 24

Recommend adding “and repayment” after 

“water service” in first line. Also questioned 

the need for including the terms “revenue 

and non-revenue producing” in the 

definition.

Are the Friant water deliveries used to pay 

for part of Jones PP (as part of the 

Exchange Contractor Arrangement) included 

in this category.

The definition will be 

revised to read as 

follows: 

All Project water 

supplies required to be 

paid under water service 

and/or repayment (9d) 

contracts.

The definition does 

include Friant water 

deliveries used to pay 

for part of Jones PP as 

part of the Exchange 

Contractor arrangement.
Comments and Responses 

Continuation 

Section of 

Policy Comment Response 

Glossary –

Paid Water

Continuation

See Pg. 24

Our understanding is that RRA Section 215 

water deliveries (un-storable flood flows) are 

defined as CVP water supply. Accordingly, we 

believe that Section 215 deliveries for M&I 

usage should be subject to the M&I 

ratesetting policy. 

215 water will be 

addressed in a 

separate Business 

Practice Guideline.
Comments and Responses 

Continuation 

Section of 

Policy Comment Response 

Glossary –

Repayment 

Period

See Pg. 25

Recommend using the following 

language:

“The time allowed for the 

recovery of United States 

investment, including:

(1) O&M deficits applicable to CVP 

contracts terminating in the year 

2030, as required by Section 105 

of Public Law 99-546; and 

(2) new 50-year repayment 

periods established for major 

rehabilitations and new 

facilities. 

Agree with suggestions with slight 

modification as follows:

“The time allowed for the 

recovery of United States 

investment, including:

(1) existing construction costs and 

O&M deficits applicable to CVP 

contracts terminating in the year 

2030, as required by Section 105 

of Public Law 99-546; and 

(2) new 50-year repayment 

periods established for major 

rehabilitations and new 

facilities. 
Other Comments and Responses 

Topic Comment Response 

Determining 

Estimated 

Deliveries 

to Set

Rates

The ratesetting policy would be 

strengthened if it included a 

method of calculating acre-feet 

consistent with other ratesetting

policies. The method should be 

consistent with M&I shortage 

provisions in the contract.

The process to determine estimated 

deliveries needs to take into account 

several factors including:

1. Timing Issues (Rates set in October, 

Rainy season begins in December

2. Availability of Actual Information (such 

as reservoir levels prior to setting Rates)

3. Availability of Water vs. Demand for 

Water 
Other Comments and Responses 

Continuation 

Topic Comment Response 

Determining 

Estimated 

Deliveries to 

Set Rates 

Continuation

We would like to memorialize 

the five year rolling average 

methodology for calculating 

O&M water rates within the M&I 

ratesetting policy. 

Reclamation would not like to 

memorialize the five year rolling 

average as part of the M&I Policy 

to allow for flexibility in 

determining deliveries.
Other Comments and Responses 

Continuation 

Topic Comment Response 

Deferred Interest 

Method

We would like to obtain a better 

understanding of the Deferred 

Interest Method used to 

calculate M&I capital interest as 

defined on pages 9 and 10 in 

the draft M&I Ratesetting policy.

Reclamation can set up 

a time to meet with 

Westlands WD 

representatives to go 

over the calculation of 

deferred interest. 
Additions to Policy 

• Gianelli Pump Generating Plant (PGP) Project Use 

Energy to San Felipe Unit 

– Currently Gianelli PGP Project Use Energy is treated as 

Direct Pumping 

• Reclamation is considering either: 

– Continuing to identify the cost as direct pumping for San Felipe 

Unit Contractors or, 

– Treating these Project Use Energy cost as storage pumping 

prospectively. 

• If there is a change, any reference to treating the cost as direct 

pumping would be removed and a footnote will be included as 

follows: 

– Prospectively from the date of this policy, Gianelli PGP project 

use energy construction and O&M will be treated as storage 

pooled cost. 
Additions to Policy Continuation 

• Legislation and Changes Section 

– PL 111-11, Subtitle G ( Aging Infrastructure) – Cost with 

interests to be repaid within 50 years 

• Determining Process to Recover Extraordinary O&M 

Cost in Conformity within the Ratesetting Policies 

Established 

– Some of the areas being reviewed and discussed are: 

• Conveyance Cost Pools (who pays?) 

• Deliveries to allocate cost 

• Threshold to Expense Annual Cost in Year Incurred (maximum 

amount) 

• Repayment Periods 
Next Steps 

• 30 Day Comment Period for Contractors 

– Due Close of Business July 23, 2014 

– Send to Jesus Reynoso at: 

• JReynoso@usbr.gov or, 

• MP-3400, 2800 Cottage Way, Sacramento, CA 95825 

– If sent by mail, please call Jesus Reynoso so that he can log that a 

comment has been sent and follow-up if not received. 

• Follow-up Workshop in September 

– To go Over any Additional Comments and Responses 
Questions and Answers (Q&A) 

• Point of Contact is Jesus Reynoso at 916-978-5362