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Foreword

The final Central Valley Project (CVP) water rates for contract year (CY) 2018 and the final 

CVP annual contractor accountings for fiscal year (FY) 2016 have been posted to the Bureau of 

Reclamation website. 

The final water rates and final annual contractor accountings for the years 2004 through 2018 

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.

Site Security Costs

Projected costs for security guards and patrols for FY 2018 are included in the water rates. The 

estimated total projected costs for Irrigation and M&I are $3,981,059 and $596,622 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 2018 

through February 2019 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 2018, the 

budgeted costs were $3,579,000 and those allocated to Irrigation and M&I were estimated at 

$1,853,664 and $149,248 respectively.

Project Use Energy (PUE) Costs for FY 2016 Accountings

The PUE costs included in the FY 2016 annual CVP contractor accountings process are based on 

estimated costs. This years’ contractor accountings also includes a true-up of FY 2015 PUE 

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

Estimated PUE Costs for FY 2016 $24,992,498

FY 2015 PUE True-up Adjustment ($10,227,690)

Total Irrigation and M&I PUE Expenses in FY 2016 $14,764,808
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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 2018, there will be costs projected to be approximately $6.9 million and 

are included in the 2018 water rates. In future years, these costs are 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 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 estimated deliveries to use a 7-year average for 2018. For irrigation, the 

interpretation is that water deliveries for the CVP in 2018 were to be considerably higher than 

the 7-year average. As a result, Reclamation decided to consider other alternatives for 

calculating irrigation O&M water rates. For 2018, Reclamation decided to use the following for 

estimating irrigation O&M water deliveries:
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• 35% of contract entitlement (CE) for the majority of water service contracts;

• 75% of CE for Sacramento River Settlement contractors; and

• The higher of the 7-year average or 35% of CE for direct pumping contractors.

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 MidPacific 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 2018 

for both Irrigation and M&I.

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 TBD TBD

2018 $6,236,549 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 TBD TBD

2018 $890,154 TBD TBD

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 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
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Federal Investments

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

September 30, 2016 identifiable to Irrigation and M&I:

Construction Cost Allocation by Function thru FY 2016

Function Allocation Repayment Unpaid % Repaid

Water Service:

Irrigation $1,179,261,833 $583,638,802* $595,623,033 49.49%

M&I $118,613,501 $114,780,670 $3,832,832 96.77%

Other Purposes:

Commercial Power $895,103,895

Federal Taxpayer $804,423,271

State of California $338,500,052

Local Entities $261,400

$3,336,163,952

*Ability to pay relief is included as repayment in the amount of $56,338,332.

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 Acre-Feet

Difference 

(Over)/Under

O&M 

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

2017 TBD 2,574,135 TBD

2018 TBD 1,920,756 TBD

Construction

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

2017 TBD 1,545,547 TBD

2018 TBD 1,607,776 TBD
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Year

Actual IRR 

Construction Recovery

Projected Annual

Average Construction 

Recovery

Difference

(Over)/Under

2003 $19,608,449 $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 - $37,174,567 $(37,174,567)

2016 $1,120,449 $39,328,648 $(38,208,199)

Significant impacts to Water 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 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 
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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.

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 2018 Water Rates, refer to Schedule A-9 for both 

Irrigation and M&I.

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 TBD TBD

2018 $775,000 TBD TBD
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CVP Reclamation Reform Act Section 215 Revenue Credit

The guidelines for crediting RRA 215 revenue is included on the WEB site 

at https://www.usbr.gov/mp/cvpwaterrates/wtr_ctr_notices/2015/. Per the guidelines on the WEB 

site, Reclamation has credited the RRA 215 Revenue to contractors in fiscal year 2016. The 

credit associated with Water Marketing was allocated to water contractors and first applied to 

ARRA balances and then to other O&M deficits. The credit for Conveyance Construction was 

applied to the Conveyance Construction component. Provided is the RRA 215 Water Rate 

Revenue that was credited in FY 2016:

Irrigation

Water Marketing O&M $2,914,886

Conveyance Construction $1,856,893

Other $45,821

M&I

Water Marketing O&M $67,132

Conveyance O&M $16,429

Conveyance Construction $211,486

Other $23,823

Questions

Please direct any questions regarding the CVP 2018 final water rates or the CVP 2016 annual 

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