# Lower Colorado River Basin “Development Fund”

# Context This presentation is in response to EPA questions to Reclamation related to the Lower Colorado River Basin Development Fund. This presentation together with Reclamation’s draft answers to EPA questions, is designed specifically to differentiate between the annual processing of revenues and dispositions and the later uses of those revenues pursuant to the Arizona Water Settlements Act. This presentation does not, and should not be considered to depict the complete working of Development Fund as a whole.

# Current Development Fund

Structure

**Checking Account**  **Money Market**  **Account** 

# Development Fund Analogies

# Checking Account Side

• Collects Revenues from various Sources 

# • Pays monthly expenses for OM&R of NGS 

# • Tracked Monthly on a Source and Disposition Table. 

# • Any Net income/losses remaining at the end of the year are applied to CAWCD repayment obligation.

# Checking Account Side

Development Fund (Flow of Funds)

• Navajo Miscellaneous R evenue • Navajo Surplus Sales • Calpine • Parker Davis/Hoover 4.5 Mills • Transmission Line Loss R evenue • CAWCD Applied Revenue • SO2 Credit Sales • EP A Credit • Right of Use Misc – Available • Non- Recurring Items

Revenue Sources Checking Account

Side of Development Fund • Salt River Project – NGS operating costs • Transmission Systems costs • Navajo Oversight costs Payments - Dispositions

# Monthly Source and Distribution

# Revenue Sources a. Navajo Misc Revenue i. Includes revenues earned and collected by WAPA from activities unrelated to the primary operation of the Navajo Generating Station (NGS) and Transmission Systems. 

### b. Navajo Surplus Sales i. Includes revenues from sales of surplus power not used by CAWCD to operate the CAP project. Surplus power is sold by WAPA and revenue is dependent on market prices. 

### c. Calpine i. Revenue related to Calpine’s use of the Navajo Project transmission systems to transmit power across Arizona. 

### d. Parker Davis/Hoover 4.5 Mills a. Arizona purchasers of power from the Boulder Canyon and Parker Davis Projects pay a 4.5 mill (1 mill = $.001) surcharge, for the purposes of aiding in the repayment of the CAP.

# Revenue Sources - Continued... e. Transmission Line Loss Revenue i. Revenue received when NGS recharges a power company’s power lines after a load loss occurs. 

### f. CAWCD Applied Advances i. Revenue collected from CAWCD monthly pursuant to Agreement #1 -CU -30- P1212 established October 1, 2011. Reclamation bills CAWCD monthly for CAWCD’s share of the OM&R expenses associated with NGS. 

### g. SO2 Credit Sales i. Reclamation agreed to make its share of the SO2 emission allowances allocated by the EPA available to SRP to cover the SO2 emissions related to the total generation from the United States entitlement in NGS.

# Revenue Sources - Continued... h. EPA Credits i. SRP installed scrubbers to reduce emissions from NGS. Credits for actual emissions below the legal limit are sold. 

### i . Right of Use/Miscellaneous - Available i. Revenue include, but are not limited to, revenues from the use, rental, sale, or exchange of CAP lands. 

### j. Non- Recurring Items i. This line item is used to capture any sources of funds that are unusual or infrequent in nature. 

### k. Interest from Investment i. P.L. 108-451 gave Reclamation the authority to invest the cash available in the Development Fund. The interest revenue generated from these investments is not available towards CAWCD’s repayment obligation, and is used to meet the requirements of the Arizona Water Settlements Act.

# Payments - Dispositions a. Salt River Project – NGS i. Capital Equipment ii. Insurance iii. Operations & Maintenance (O&M) iv. Materials & Supplies v. Fuel vi. Coal vii. Indenture of Lease viii. Litigation

# Payments – Dispositions Continued... b. Transmission Systems Costs i. Arizona Public Service – Southern O&M • Costs incurred to maintain the transmission system responsible for delivery of power to Southern Arizona ii. Arizona Public Service – Southern Capital
• Capital costs incurred to maintain the transmission system responsible for delivery of power to Southern Arizona. iii. Nevada Power - Western
• Costs incurred to maintain the transmission systems that send power to California. iv. Liberty Phase Shifter
• Costs incurred to operate and maintain a phase shifter in Liberty, Arizona which is a component of the Navajo Project power transmission system. v. McCullough Switching Station – SRP/CAWCD
• The McCullough switching station contains two main switchyards. The costs are for the O&M of the switchyards used by SRP and CAWCD. vi. WAPA – CAP Transmission
• Costs for work performed by WAPA on the CAP Transmission system.

# Payments – Dispositions

Continued... c. Navajo Oversight i. 

### WAPA Oversight – Four Party Agreement
• WAPA’s costs associated with the oversight work on the original Four Party Agreement on the NGS that expired September 30, 2011. 

### ii. WAPA Navajo Surplus Sales/Trans Purchases P1212
• WAPA’s costs associated with oversight work on the new agreement #1 -CU-30- P1212 for Reclamation’s share of power from NGS. 

### iii. USBR
• Reclamation’s share of oversight/administration costs associated with NGS

# CAWCD Repayment Credit

Calculation

**Revenue Sources Payments**  **Dispositions Net**  **Remaining (Repayment**  **Credit/Debit)**

# CAWCD’s Repayment Obligation
• The CAP Project was placed into Repayment Status in 1994. Current repayment scheduled for completion in 2046 . 

# • CAWCD’s total repayment obligation is a follows:

– Principal - $1,646,462,500

– Interest - $ 971,347,529

– Total - $2,617,810,029

# Repayment Table - Fixed

# Bill for Collection
• Reclamation invoices CAWCD each year for its repayment amount. 

## • The Repayment Bill is calculated by subtracting (or adding) the net applicable credits from the Check Book Side of the annual source and disposition. 

## • For 2011

– Repayment Obligation $55,311,163

– Net remaining revenues ($28,351,189)

– 2011 Bill for Collection $26,959,974 

## • The entire repayment obligation amount is then moved into the Money Market side within the Development Fund and is then available to meet the obligations in P.L 108-451 (AWSA).

# Invoice to CAWCD

# Money Market Side

Development Fund
• Arizona Water Settlement Act - P.L 108-451

– Authorized the Development Fund to be used for specific purposes rather than returned to Treasury for repayment of CAP.

– Two priority cascade structures were established. 

## • Cascade One - Use of full Repayment Stream 

## • Cascade Two – If revenues in excess of Repayment Stream

# Money Market Side – Development Fund Cascade One Priority Structure: 1. Fixed OM&R for Tribes 

## 2. GRIC - SCIP Rehabilitation and OM&R fund 

## 3. Without regard to priority, payment of the following: 

### • New Mexico Unit (To be paid first) 

### • GRIC - PMIP Construction (CAP project) 

### • Tohono O’odham Nation SAWRSA authorized items 

### • SCIDD Lining (non-Indian SCIP Rehabilitation) 

### • San Carlos CAP-IDD (CAP/Settlement) 

### • Future Indian Settlements Sub-Account 

### • Federal Implementing Costs 

## 4. CAP Indian Systems – Non Settlement Tribes

# Money Market Side

Development Fund Cascade Two Priority Structure: 1. Fixed operation, maintenance and replacement (OM&R) charges associated with the delivery of CAP water to Indian tribes. 

## 2. Final year’s payment on CAP repayment obligation 

## 3. U.S Treasury General Fund to reimburse fixed OM&R costs for CAP Indian deliveries and Indian water rights previously paid from the Development Fund. 

## 4. U.S Treasury General Fund to 9(d) debt made nonreimbursable under Settlement Act. 

## 5. U.S. Treasury General Fund.

# AWSA Funding Expectations

Table 29.1.1

Note: This is T

able 29.1.1 from the Arizona Water Settlement Act (Public Law 108-451 ), which was used to document the parties’ funding expectations at that time. Payments for these activities will be made in accordance with the Act and may or may not be as depicted on this T

able. Only anticipated Cascade One priorities are shown.