Benefit Calculation, Monetization, and Resiliency A3 ... … · August 2017 Benefit Calculation, Monetization, and Resiliency . A3: Monetized Benefits Analysis . Pacheco Reservoir

August 2017

Benefit Calculation, Monetization, and Resiliency

A3: Monetized Benefits Analysis

Pacheco Reservoir Expansion Project

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Contents

Benefit Calculation, Monetization, and Resiliency A.3 Monetized Benefits Analysis August 2017 – i

Contents

Page

CHAPTER 1 Introduction ..................................................................................... 1-1 1.1 Project Applicant and Project Partners ......................................................... 1-3

CHAPTER 2 Ecosystem Improvement – Pacheco Creek .................................. 2-1 2.1 Physical Benefit Quantification ..................................................................... 2-1

2.1.1 Additional Information ............................................................................ 2-4 2.2 Benefit Monetization ..................................................................................... 2-5

2.2.1 Economic Methods ................................................................................ 2-5 2.2.2 Economic Analysis ................................................................................ 2-5 2.2.3 Additional Information ............................................................................ 2-6

CHAPTER 3 Ecosystem Improvement – San Joaquin River Watershed .......... 3-1 3.1 Physical Benefit Quantification ..................................................................... 3-1



CHAPTER 4 Emergency Response ..................................................................... 4-1 4.1 Physical Benefit Quantification ..................................................................... 4-1

4.1.1 Additional Information ............................................................................ 4-2 4.2 Physical Benefit Monetization ...................................................................... 4-2


CHAPTER 5 Municipal and Industrial Water Supply .......................................... 5-1 5.1 Physical Benefit Quantification ..................................................................... 5-1



CHAPTER 6 Municipal and Industrial Water Quality ......................................... 6-1 6.1 Physical Benefit Quantification ..................................................................... 6-1



CHAPTER 7 References ....................................................................................... 7-1

Contents

Benefit Calculation, Monetization, and Resiliency ii – August 2017 A.3 Monetized Benefits Analysis

Tables

Table 1-1. Summary of Physical Benefit Quantification and Monetization Methods Used for the Pacheco Reservoir Expansion Project .......................................... 1-2

Table 2-1. Summary of Pacheco Creek Steelhead Cohort Scores by Water Year Type Under 2030 Conditions ............................................................................. 2-3

Table 2-2. Summary of Pacheco Creek Steelhead Cohort Scores by Water Year Type Under 2070 Conditions ............................................................................. 2-4

Table 2-3. Alternative Costs Based on Single-Purpose Reservoirs for Ecosystem Improvement Monetary Benefits on Pacheco Creek Under 2030 and 2070 Future Conditions .............................................................................................. 2-6

Table 3-1. Increased Environmental Water Supplies for San Joaquin River Watershed Wildlife Refuges for 2030 and 2070 Future Conditions ................... 3-1

Table 3-2 Average Annual Estimated Monetary Benefits for Increased Environmental Water Supplies to San Joaquin Watershed Refuges ................. 3-2

Table 4-1. Increased Groundwater and Surface Water Storage Available for Emergency Response for 2030 and 2070 Future Conditions ............................ 4-1

Table 4-2. Average Annual Estimated Monetary Benefits for Emergency Response for 2030 and 2070 Future Conditions ............................................... 4-3

Table 5-1. Increased M&I Water Supplies for 2030 and 2070 Future Conditions ......... 5-2

Table 5-2 Estimated Monetary Benefits for M&I Water Supplies .................................. 5-3

Table 6-1. Improved M&I Water Quality Through Reduced Incidence of Low Point Issues in San Luis Reservoir for 2030 and 2070 Future Conditions .................. 6-2

Table 6-2. Alternative Cost for M&I Water Quality Benefits Based on Santa Theresa Water Treatment Plant Upgrades ........................................................ 6-3

Figures

Figure 1-1. Modeling Process Diagram ........................................................................ 1-2

Figure 2-1. Comparison of Without- and With-Project Steelhead Cohort Scores for Pacheco Creek Under 2030 Future Conditions ............................................ 2-3

Figure 2-2. Comparison of Without- and With-Project Steelhead Cohort Scores for Pacheco Creek Under 2070 Future Conditions ............................................ 2-4

Contents

Benefit Calculation, Monetization, and Resiliency A.3 Monetized Benefits Analysis August 2017 – iii

Abbreviations and Acronyms

CDFW California Department of Fish and Wildlife CVP Central Valley Project CVPIA Central Valley Project Improvement Act CWC California Water Commission Delta Sacramento-San Joaquin River Delta GRCD Grassland Resource Conservation District M&I Municipal & Industrial NMFS National Marine Fisheries Service PPWD Pacheco Pass Water District Project Pacheco Reservoir Expansion Project Reclamation U.S. Department of Interior, Bureau of Reclamation regulations California Code of Regulations SBCWD San Benito County Water District SCCC South-Central California Coast SCVWD Santa Clara Valley Water District SLLPIP San Luis Low Point Improvement Project SWP State Water Project TR Technical Reference USFWS U.S. Fish and Wildlife Service UWMP Urban Water Management Plan WEAP Water Evaluation and Planning System WSIP Water Storage Investment Program

Contents

Benefit Calculation, Monetization, and Resiliency iv – August 2017 A.3 Monetized Benefits Analysis


Pacheco Reservoir Expansion Project Chapter 1 Introduction

Benefit Calculation, Monetization, and Resiliency A.3 Monetized Benefits Analysis August 2017 – 1-1

CHAPTER 1 INTRODUCTION This attachment provides analysis of all public and non-public monetized benefits for the Pacheco Reservoir Expansion Project (Project), as required in Sections 6004(a) and 6003(a)(1)(L) of the California Code of Regulations (regulations). For each public and non-public benefit, the methods used to derive the physical and economic benefits are described, including:

• The physical changes that are being monetized, consistent with information provided in the Physical Public Benefits tab; including linkages between physical benefits and monetized benefits, pursuant to regulations Sections 6004(a)(3) and 6004(a)(4).

• The monetization method and sources for data used, pursuant to regulations Section 6004(a)(4).

Monetary benefits for the Project have been quantified under 2030 and 2070 future conditions for the following public and non-public benefits:

• Ecosystem Improvement – Pacheco Creek

• Ecosystem Improvement – San Joaquin River Watershed

• Emergency Response

• Municipal and Industrial (M&I) Water Supply

• M&I Water Quality

Table 1-1 summarizes the physical benefit quantification and monetization methods used for the Project.


Benefit Calculation, Monetization, and Resiliency 1-2 – August 2017 A.3 Monetized Benefits Analysis

Table 1-1. Summary of Physical Benefit Quantification and Monetization Methods Used for the Pacheco Reservoir Expansion Project

Benefit Category Physical Benefit Quantification Method/Model

Physical Benefit Monetization Method

Public Benefits Ecosystem Improvement – Pacheco Creek

Pacheco Creek Steelhead Habitat Suitability Model

Alternative Cost

Ecosystem Improvement – San Joaquin River Watershed

CalSim II Alternative Cost

Emergency Response WEAP Willingness-to-Pay Non-Public Benefits M&I Water Supply WEAP Combination Alternative Cost and

Willingness-to-Pay M&I Water Quality CalSim II and WEAP Alternative Cost Key: M&I = Municipal and industrial WEAP = Water Evaluation and Planning

To quantify physical benefits for the Project, three models were applied in sequence to simulate water operations, streamflows, and steelhead habitat on Pacheco Creek. Figure 1-1 presents models used, the data transferred between them when conducting quantification of physical benefits, and the sources of hydrologic inflows used in the models.

Key: CWC = California Water Commission VIC = Variable Infiltration Capacity Figure 1-1. Modeling Process Diagram



1.1 Project Applicant and Project Partners Santa Clara Valley Water District (SCVWD) is the applicant, as defined in Section 6001 of the regulations, for this Water Storage Investment Program (WSIP) application for the Project. The primary partners in the Project include two local water agencies, Pacheco Pass Water District (PPWD) and San Benito County Water District (SBCWD), and eight south-of-Delta wildlife refuges in the San Joaquin River watershed named in the Central Valley Project Improvement Act (CVPIA) that are managed by the U.S. Fish and Wildlife Service (USFWS), California Department of Fish and Wildlife (CDFW), and the landowners of privately owned and managed wetlands in the Grassland Resources Conservation District (GRCD).

SCVWD, PPWD and SBCWD have executed a Principles of Agreement to (1) evaluate the potential benefits of expanding Pacheco Reservoir, and (2) develop a Water Storage Investment Program application for the Project. For the purposes of this WSIP application, quantification and monetization for emergency response (public benefit), M&I water supply, and M&I water quality benefits is based upon SCVWD service areas. During completion of the feasibility studies, the Project partners may further develop integrated regional operations of the expanded reservoir for emergency response, water supply (including both agricultural and M&I), and water quality (including both agricultural and M&I) benefits.




Pacheco Reservoir Expansion Project Chapter 2 Ecosystem Improvement – Pacheco Creek


CHAPTER 2 ECOSYSTEM IMPROVEMENT – PACHECO CREEK

2.1 Physical Benefit Quantification South-Central California Coast (SCCC) steelhead (Oncorhynchus mykiss) were listed by National Marine Fisheries Service (NMFS) as a threatened in 1998. In 2013, the NMFS South-Central California Steelhead Recovery Plan (NMFS 2013) identifies that a critical recovery action for SCCC steelhead is to ensure that the pattern and magnitude of water releases to Pacheco Creek from Pacheco Reservoir provides the essential habitat functions to support the life history and habitat requirements of both adult and juvenile life stages. The Project has the potential to provide substantive beneficial improvements to SCCC steelhead habitat conditions in Pacheco Creek through improved flow and temperature conditions. In accordance with Water Code section 79754, CDFW have identified 16 ecosystem improvement priorities for the WSIP. The Project would address multiple ecosystem priorities on Pacheco Creek, primarily for SCCC steelhead, including:

• Priority 1: Provide cold water at times and locations to increase the survival of salmonid eggs and fry.

• Priority 2: Provide flows to improve habitat conditions for in-river rearing and downstream migration of juvenile salmonids.

• Priority 3: Maintain flows and appropriate ramping rates at times and locations that will minimize dewatering of salmonid redds, and prevent stranding of juvenile salmonids in side-channel habitat.

• Priority 4: Improve ecosystem water quality.

• Priority 5: Provide flows that increase dissolved oxygen and lower water temperatures to support anadromous fish passage.

• Priority 8: Maintain or restore groundwater and surface water interconnection to support instream benefits and groundwater-dependent ecosystems.

• Priority 9: Enhance flow regimes or groundwater conditions to improve the quantity and quality of riparian and floodplain habitats for aquatic and terrestrial species.

• Priority 11: Enhance the temporal and spatial distribution and diversity of habitats to support all life stages of fish and wildlife species.

• Priority 12: Enhance access to fish spawning, rearing, and holding habitat by eliminating barriers to migration.



• Priority 14: Provide water to enhance seasonal wetlands, permanent wetlands, and riparian habitat for aquatic and terrestrial species on State and Federal wildlife refuges and on other public and private lands.

• Priority 16: Enhance habitat for native species that have commercial, recreational, scientific, or educational uses.

While habitat could be quantified in simplistic terms, such as changes in flow or temperature conditions, such characterizations would not capture the complex physical and biological interrelationships within the system. Consistent with the WSIP Technical Reference (TR), monetization of ecosystem improvement benefits for SCCC steelhead in Pacheco Creek considers the availability of suitable habitat for all steelhead life stages. Improvements in habitat conditions for SCCC steelhead in Pacheco Creek were directly evaluated through the use of the Pacheco Creek Steelhead Habitat Suitability Model. The Pacheco Creek Steelhead Habitat Suitability Model was developed through grant funding provided by the Fisheries Restoration Grant Program, including contributing partner CDFW.

An output of the Pacheco Creek Steelhead Habitat Suitability Model is a steelhead cohort score. The steelhead cohort score provides an index of the ability of Pacheco Creek to support SCCC steelhead through all life stages, based on the 15-month period in which a cohort is expected to remain in the creek (i.e., from adult migration through juvenile outmigration). The steelhead cohort score reflects habitat suitability in Pacheco Creek over the lifecycle. For example, if habitat conditions for early life stages during winter months are good, but Pacheco Creek has no flow during summer months, the resultant steelhead cohort score would be very low.

To quantify physical changes for ecosystem improvement for steelhead in Pacheco Creek, the Pacheco Creek Steelhead Habitat Suitability Model was used to simulate with- and without-Project conditions for 2030 and 2070 future conditions. Pacheco Reservoir storage levels, and releases to Pacheco Creek from the SCVWD Water Evaluation and Planning (WEAP) model, were used as inputs into the Pacheco Creek Steelhead Habitat Suitability Model. Table 2-1 and Figure 2-1 present with- and without-Project steelhead cohort scores under 2030 future conditions. Table 2-2 and Figure 2-2 present steelhead cohort scores for with- and without-Project steelhead cohort scores under 2070 future conditions. As shown in Table 2-1 and 2-2, the Project could significantly improve the viability of steelhead populations through improved habitat conditions in Pacheco Creek in all year types, under both 2030 and 2070 future conditions. The Project provides the most significant improvement in steelhead cohort scores in critical years, where steelhead cohort scores are increased by 478 percent and 505 percent, under 2030 and 2070 future conditions, respectively.



Table 2-1. Summary of Pacheco Creek Steelhead Cohort Scores by Water Year Type Under 2030 Conditions

Water Year Type1

2030 Future Conditions With-Project2

(Steelhead Cohort Score)

Without-Project2 (Steelhead Cohort

Score)

Difference (Steelhead Cohort

Score)

Percent Change

(%) Wet 25.6 10.1 15.5 153% Above Normal 26.4 9.8 16.7 170% Below Normal 22.9 10.2 12.7 125% Dry 22.1 9.5 12.6 133% Critical 18.7 3.2 15.5 478% Average All Years 23.4 8.9 14.5 162% Notes: 1 Water year types based on the Sacramento Valley water year hydrologic classification. 2 Values were derived from Pacheco Creek Steelhead Habitat Suitability Model.

Figure 2-1. Comparison of Without- and With-Project Steelhead Cohort Scores for Pacheco Creek Under 2030 Future Conditions



Table 2-2. Summary of Pacheco Creek Steelhead Cohort Scores by Water Year Type Under 2070 Conditions

Water Year Type1

2070 Future Conditions With-Project2

(Steelhead Cohort Score)

Without-Project2 (Steelhead Cohort

Score)

Difference (Steelhead Cohort

Score)

Percent Change

(%) Wet 25.1 9.2 15.9 172% Above Normal 24.2 8.9 15.3 172% Below Normal 22.8 11.2 11.6 104% Dry 22.2 7.9 14.3 180% Critical 19.0 3.1 15.9 505% Average All Years 23.0 8.3 14.7 178% Notes: 1 Water year types based on the Sacramento Valley water year hydrologic classification. 2 Values were derived from Pacheco Creek Steelhead Habitat Suitability Model.

Figure 2-2. Comparison of Without- and With-Project Steelhead Cohort Scores for Pacheco Creek Under 2070 Future Conditions

2.1.1 Additional Information Additional information on the quantification of physical ecosystem improvement benefits on Pacheco Creek is included in Chapter 2 of the Benefit Calculation, Monetization, and Resiliency Attachment A5: Quantification Support. Additional information on the Pacheco Creek Habitat Suitability Model is included in Chapter 4 and Exhibit 3 of the Benefit Calculation, Monetization, and Resiliency Attachment A1: Project Conditions.



2.2 Benefit Monetization

2.2.1 Economic Methods The approach to estimate the SCCC steelhead ecosystem improvement benefit considers a least-cost means of providing, at minimum, the same amount of physical benefit as the most likely alternative, in the absence of the Project. This method is consistent with the “alternative cost” method identified in the WSIP TR. Because improved flows and reduced water temperatures during critical periods (provided by additional surface storage) would be essential to achieving a viable steelhead population, the most likely alternative means of providing that benefit would be a single-purpose reservoir at the same location as the Project. As ecosystem improvement benefits (i.e., steelhead cohort scores) differ between 2030 and 2070 future conditions, single-purpose reservoir sizes were identified for both 2030 and 2070 future conditions.

2.2.2 Economic Analysis Evaluating the cost of the most likely alternative for each future condition (2030 and 2070) included analysis of six separate reservoir expansions, operated solely and optimized for improved steelhead habitat conditions, and was estimated using steelhead cohort scores. The single-purpose reservoir size was determined by identifying the smallest size that provided a similar long-term average steelhead cohort score, based on simulation results. For 2030 future conditions, the identified single-purpose reservoir size was 80,000 acre-feet. For 2070 future conditions, the identified single-purpose reservoir size was 65,000 acre-feet. Design and cost estimates were developed for each single-purpose reservoir size. Table 2-3 summarizes the costs for these single-purpose projects for the 2030 future conditions (80,000 acre-foot reservoir) and 2070 future conditions (65,000 acre-foot reservoir).



Table 2-3. Alternative Costs Based on Single-Purpose Reservoirs for Ecosystem Improvement Monetary Benefits on Pacheco Creek Under 2030 and 2070 Future Conditions

Item 2030 Future Conditions(1)

2070 Future Conditions(1)

Physical Attributes of Single-Purpose Reservoir Active storage (acre-feet) 80,000 65,000 Dam height (feet msl) 657 639 Full pool elevation (feet) 642 624 Fill quantities (million cy) 11.4 9.7 Costs

Capital cost ($ millions)1, 2 $622.0 $570.0 Interest during construction ($ millions)1, 2 $57.8 $53.0

Annualized Costs Amortization of capital costs ($ millions)1 $22.6 $20.7 Amortization of interest during construction ($ millions)1 $2.3 $2.1 Annual OM&R ($ millions)1 $0.6 $0.6 Annual replacement ($ millions)1 $0.6 $0.6 Annual future monitoring/Adaptive management ($ millions)1 $0.1 $0.1

Total Annualized Costs ($ millions)1, 3 $26.2 $24.1 Notes: 1 Based on 2015 price levels in accordance with the Water Storage Investment Program Technical Reference. 2 Based on a 3.5 percent discount rate in accordance with Water Storage Investment Program Technical Reference. 3 All numbers are rounded for display purposes, and therefore line items may not sum to totals. Key: cy = cubic yards msl = mean sea level OM&R = Operations, maintenance, and repair

2.2.3 Additional Information Additional information on the monetization of ecosystem improvement benefits on Pacheco Creek is included in Chapter 2 of the Benefit Calculation, Monetization, and Resiliency, Attachment A5: Quantification Support.

Pacheco Reservoir Expansion Project Chapter 3 Ecosystem Improvement – San Joaquin River Watershed


CHAPTER 3 ECOSYSTEM IMPROVEMENT – SAN JOAQUIN RIVER WATERSHED

3.1 Physical Benefit Quantification The California Water Commission (CWC) and CDFW have identified specific ecosystem priorities in the WSIP—one of which is providing water to enhance seasonal wetlands, permanent wetlands, and riparian habitat for aquatic and terrestrial species on state and federal wildlife refuges. An ecosystem improvement benefit of the Project would be the increased deliveries of Incremental Level 4 water supplies to the Refuge Water Supply Program. The Project would transfer 2,000 acre-feet of SCVWD’s Central Valley Project (CVP) water supply, directly or through transfers and exchanges, during below normal water years, to the Incremental Level 4 Refuge Water Supply Pool—which is managed by the U.S. Department of the Interior, Bureau of Reclamation (Reclamation) and U.S. Fish and Wildlife Service. SCVWD has requested that Reclamation dedicate this supply to the GRCD which provides water to the largest contiguous block of wetlands remaining in California’s Central Valley. The increased supply would provide habitat and food for migratory birds of the Pacific Flyway, resident bird species, and many wildlife species.

An analysis was performed to estimate the benefit of improved environmental water-supply reliability under 2030 and 2070 future conditions. The CalSim II model was used to estimate increases in environmental water supplies available to the Incremental Level 4 Refuge Water Supply Pool, between with- and without-Project for 2030 and 2070 future conditions. These CalSim II simulations specifically targeted improving deliveries for GRCD. Increased environmental water supplies for San Joaquin River watershed wildlife refuges are summarized in Table 3-1.

Table 3-1. Increased Environmental Water Supplies for San Joaquin River Watershed Wildlife Refuges for 2030 and 2070 Future Conditions

Water Year Type1

2030 Future Conditions 2070 Future Conditions With-

Project2 (acre-feet)

Without- Project2

(acre-feet)

Difference (acre-feet)

With- Project2

(acre-feet)

Without- Project2

(acre-feet)


Below Normal 279,931 277,931 2,000 280,924 278,924 2,000 Notes: 1 Water year types based on the Sacramento Valley water year hydrologic classification. 2 Values were derived from CalSim II and reflect south-of-Delta refuge deliveries.

3.1.1 Additional Information Additional information on the quantification of physical refuge water-supply benefits is included in Chapter 3 of the Benefit Calculation, Monetization, and Resiliency Attachment A5: Quantification Support. Additional information on CalSim II assumptions is included in Chapter 2 of the Benefit Calculation, Monetization, and Resiliency Attachment A1: Project Conditions.

Pacheco Reservoir Expansion Project Chapter 3 Ecosystem Improvement – San Joaquin River Watershed



3.2.1 Economic Methods The approach to estimate environmental water-supply benefits considers the estimated short-term price to purchase water supplies on the open market, the most likely alternative in the absence of a firm water supply from the Project. This method is consistent with the “alternative cost” method identified in the WSIP TR.

3.2.2 Economic Analysis To monetize these ecosystem improvement benefits for San Joaquin River watershed refuges, the cost associated with acquiring 2,000 acre-feet in below normal water years was determined for 2030 and 2070 future conditions. The analysis relies on values estimated through application of a water-transfer pricing model, with consideration of the costs associated with conveying the water to the refuges being served. Table 3-2 provides a summary of the long-term average of the ecosystem improvement benefits of the Project under 2030 and 2070 future conditions. Average annual environmental water-supply reliability benefits are $0.3 million per year, under 2030 future conditions, and $0.2 million under 2070 future conditions.

Table 3-2 Average Annual Estimated Monetary Benefits for Increased Environmental Water Supplies to San Joaquin Watershed Refuges for 2030 and 2070 Future Conditions

Monetary Benefit 2030 2070 Environmental water supply for San Joaquin River watershed refuges ($ millions)1, 2 $0.3 $0.2

Notes: 1 Water year types based on the Sacramento Valley water year hydrologic classification. 2 Based on 2015 price levels in accordance with the Water Storage Investment Program Technical Reference.

A variety of factors suggest that the value of water may increase in the future, across all water-use sectors, including environmental. Further, total economic value is measured as the combination of market and non-market components. The refuge water-supply reliability benefit estimates discussed above are based on short-term, spot-market pricing, and represent some portion of the total value, or willingness to pay for increased refuge water-supply reliability with the Project. Although, the water-market price is a good approximation of benefit value, it may underestimate the total public willingness to pay for market and non-market components of value.

3.2.3 Additional Information Additional information on the quantification of physical refuge water-supply benefits is included in Chapter 3 of the Benefit Calculation, Monetization, and Resiliency Attachment A5: Quantification Support.

Pacheco Reservoir Expansion Project Chapter 4 Emergency Response


CHAPTER 4 EMERGENCY RESPONSE

4.1 Physical Benefit Quantification An analysis was performed to quantify and value emergency water supplies provided by the Project and available to SCVWD M&I water users in the event of a Sacramento-San Joaquin River Delta (Delta) water supply outage. These disruptions depend upon a variety of factors, including the risk of a seismic or other catastrophic event, vulnerability of non-Delta water supplies, and the timing and duration of the supply disruption. Supply disruptions in an emergency that occur during prolonged periods of drought may result in significantly higher economic costs than those that coincide with wetter conditions. In addition, supply disruptions that are shorter in duration will result in lower economic costs to water users.

An expanded Pacheco Reservoir would be integrated into SCVWD existing water system, including coordinated operations of SCVWD’s surface water reservoirs and underlying groundwater aquifers. To quantify this benefit, the SCVWD WEAP model was used to estimate with- and without-Project storage conditions (both surface storage and groundwater storage) throughout the SCVWD system under 2030 and 2070 future conditions. CalSim II CVP and State Water Project (SWP) allocations were used as inputs into the WEAP model. With- and without-Project M&I emergency response water supplies available in SCVWD surface water reservoirs and underlying groundwater basins under 2030 and 2070 future conditions are shown in Table 4-1.

Table 4-1. Increased Groundwater and Surface Water Storage Available for Emergency Response for 2030 and 2070 Future Conditions

Water Year Type1

2030 Future Conditions 2070 Future Conditions With

Project2 (acre-feet)

Without Project2,3 (acre-feet)


With Project2

(acre-feet)

Without Project2,3 (acre-feet)


Wet 718,424 615,266 103,158 630,519 524,359 106,161 Above Normal 692,570 587,387 105,183 524,543 446,371 78,172 Below Normal 611,042 531,278 79,764 476,399 407,727 68,672 Dry 616,966 535,804 81,162 458,336 380,051 78,285 Critical 476,277 424,882 51,395 345,725 290,977 54,748 Average All Years 637,145 550,408 86,737 508,196 426,056 82,140 Notes: 1 Water year types based on the Sacramento Valley water year hydrologic classification. 2 Values were derived from CalSim II and Santa Clara Valley Water District’s WEAP model. 3 Under without-Project conditions, water stored in Pacheco Reservoir would not be available for emergency response due to lack of

connection to SCVWD water system. Under with-Project conditions, an expanded Pacheco Reservoir would be connected to the SCVWD water system via the Pacheco Conduit.

Key: WEAP = Water Evaluation and Planning SCVWD = Santa Clara Valley Water District



4.1.1 Additional Information Additional information on the quantification of physical emergency response benefits is included in Chapter 4 in Benefit Calculation, Monetization, and Resiliency Attachment A5: Quantification Support. Additional information on the WEAP model and related assumptions is included in Chapter 3 in Benefit Calculation, Monetization, and Resiliency Attachment A1: Project Conditions.

4.2 Physical Benefit Monetization

4.2.1 Economic Methods Section 5.3 of the WSIP TR identifies three methodologies for monetizing economic benefits, including avoided cost, alternative cost, and willingness-to-pay. Emergency water supply benefits are estimated by applying a consumer demand curve representing the value that Santa Clara County residents place on avoiding water supply shortages. This method is consistent with the “willingness to pay” method identified in the WSIP TR. Supply disruptions in an emergency that occur during prolonged periods of drought may result in significantly higher economic costs than those that coincide with wetter conditions while, supply disruptions that are shorter in duration will result in lower economic costs to water users. Therefore, the costs associated with this benefit were measured according to water users’ willingness to pay to avoid interruptions in water deliveries.

4.2.2 Economic Analysis The economic benefits of emergency water supplies are measured according to water users’ willingness to pay to avoid interruptions in water deliveries. The value of emergency supplies provided by the Project was estimated by applying estimated short-run price elasticity to a constant elasticity demand function, calibrated to observed price and quantity information from Bay Area water providers. This analysis estimated the value of emergency water supplies in Santa Clara County to be about $4,549 per acre-foot, on average, under 2030 future conditions. This estimated value of $4,549 per acre-foot was used to estimate monetary benefits for both 2030 and 2070 future conditions. Multiplying $4,549 per acre-foot by the total emergency water supply available from the Project, under 2030 and 2070 future conditions, provided an estimate of the economic benefit associated with the volume of water supplied. The total was then multiplied by the annual probability of occurrence for an emergency event to obtain the expected annual benefit. The expected annual emergency water supply benefit was then reduced by the expected marginal cost of emergency water delivery to M&I customers.

As shown in Table 4-2, the estimated annual value of emergency water-supply benefits was $16.4 million, for 2030 future conditions, and $15.5 million for 2070 future conditions. The difference in these values reflects the different simulated average storage conditions between 2030 and 2070 future conditions (see Table 4-1).



Table 4-2. Average Annual Estimated Monetary Benefits for Emergency Response for 2030 and 2070 Future Conditions

Monetary Benefit 2030 2070 Emergency response ($ millions) 1 $16.4 $15.5

Notes: 1 Based on 2015 price levels in accordance with the Water Storage Investment Program Technical

Reference.

Various factors impact the economic value attributed to emergency water supplies, beyond the volume of water available in storage at the time of a Delta water export emergency. These factors include the assumed level (percent reduction in supplies) and duration of shortages experienced by water users; price elasticity of demand assumptions, and the effect of a Delta emergency (such as a flood or earthquake that breaches one or more Delta islands) on salinity conditions at municipal intakes. A sensitivity analysis was performed to assess the effects of benefit monetization methodologies on the estimated benefits of emergency water supplies. This sensitivity analysis was developed consistent with WSIP TR Sections 4.11.2.1 (Delta Levee Failures, Accidents, or Terrorism that Impact Delta Water Supply Operations), and 4.11.2.1 (Earthquakes that Impact Local or Regional Water Supply Operations). This sensitivity analysis resulted in a higher net present-value benefit estimate than the resultant net present value for emergency water-supply benefits reported in Table 4-2.

4.2.3 Additional Information Additional information on the monetization of emergency response benefits is included in Chapter 4 of the Benefit Calculation, Monetization, and Resiliency Attachment A5: Quantification Support.




Pacheco Reservoir Expansion Project Chapter 5 Municipal and Industrial Water Supply


CHAPTER 5 MUNICIPAL AND INDUSTRIAL WATER SUPPLY

5.1 Physical Benefit Quantification An analysis was performed to value the benefits of improved M&I water-supply reliability under 2030 and 2070 future conditions. SCVWD’s WEAP model was used to estimate possible increases in water-supply reliability. The Project will improve SCVWD M&I water supplies through an increased ability to fully utilize CVP allocations, and through development of local water supplies from the Pacheco Creek watershed. Table 5-1 shows changes in water supply, by water year type, and for long-term average conditions for 2030 and 2070 future conditions.

As shown in Table 5-1, the Project would improve M&I water-supply reliability under all year types for both 2030 and 2070 future conditions. As shown in Table 5-1, the largest increases in M&I water-supply reliability under 2030 future conditions occurs during dry and critical years. Under 2070 future conditions, the largest increases in M&I water-supply reliability benefits occurs in above normal and wet years. Pursuant to Section 6004(a)(1)(B) of the regulation, without-Project future water supplies in the WEAP model included only projects, programs, and water-management actions that are under construction, or approved and permitted. Although the SCVWD 2015 Urban Water Management Plan (UWMP) included several projects and programs to increase water supplies (e.g., water recycling, groundwater recharge) by 2030, increased water supplies from these projects were not included in the WEAP model, since these projects have yet to be fully permitted (consistent with Section 6004(a)(1)(B) of the regulation) (SCVWD 2015). Pursuant to Section 6004, (a)(4)(D) of the regulation, and the WSIP TR, Department of Finance population estimates were used to estimate future water demands. Thus, consistent with California Water Code and WSIP TR requirements, the WEAP simulations incorporated significant increased water demands for 2030 and 2070, but assumed no increase in available water supplies to meet those demands. For 2070 future conditions, these two assumptions resulted in unmet water demands in all year types, and water supplies from the Project being primarily used in wet and above normal years. It is highly unlikely that SCVWD would not develop additional water supplies over the next 50 years. If SCVWD develops new water supplies—such as those identified in the 2015 UWMP that provide for consist water supplies across all year types—it is anticipated that the Project benefits (as shown in Benefit Calculation, Monetization, Resiliency Attachment A12: Uncertainty) would shift to drier-year types (i.e., dry and critical), similar to the 2030 future conditions simulation.



Table 5-1. Increased M&I Water Supplies for 2030 and 2070 Future Conditions 2030 Future Conditions 2070 Future Conditions

Water Year Type1

With- Project2

(acre-feet)

Without- Project2

(acre-feet) Difference (acre-feet)

With- Project2

(acre-feet)

Without- Project2

(acre-feet) Difference (acre-feet)

Wet 390,925 390,975 -50 475,117 468,414 6,704 Above Normal 389,305 388,266 1,039 436,586 431,386 5,201 Below Normal 372,305 368,927 3,903 377,780 378,841 -1,061Dry 369,475 349,628 19,846 356,844 353,391 3,452 Critical 296,569 286,356 10,213 268,615 270,068 -1,453Average All Years 368,943 362,630 6,313 395,450 392,166 3,284 Notes: 1 Water year types based on the Sacramento Valley water year hydrologic classification. 2 Values were derived from Santa Clara Valley Water District’s WEAP model. Key: WEAP = Water Evaluation and Planning

5.1.1 Additional Information Additional information on the quantification of M&I water supply physical benefits is included in Chapter 5 Benefit Calculation, Monetization, and Resiliency, Attachment A5: Quantification Support.


5.2.1 Economic Methods Section 5.3 of the WSIP TR identifies three methodologies for monetizing economic benefits, including avoided cost, alternative cost, and willingness to pay. M&I water-supply benefits are quantified using a model that estimates the cost of water transfers to Santa Clara County. This method is consistent with the “alternative cost” method identified in the WSIP TR. M&I water users have increasingly participated in the water transfer market to augment their supplies. Therefore, to estimate M&I supply-benefit values, a water transfer pricing model, and thorough consideration of the costs associated with conveying the water to the M&I service areas, was used. The model estimates that the cost of water transfers will continue to increase in the future, and eventually will reach levels approaching willingness to pay. In this analysis, the future M&I water-supply benefits estimated (using the water transfer pricing model) were constrained by a willingness-to-pay value that was determined using a demand curve representing Santa Clara County residential water values.

5.2.2 Economic Analysis To quantify these benefit values, the average annual change in M&I supply from the WEAP simulation results was multiplied by the unit value of water for the corresponding water year type. Table 5-2 lists the resulting cost of purchasing this water on the transfer market.



Table 5-2 Estimated Monetary Benefits for M&I Water Supplies for 2030 and 2070 Future Conditions

Benefit 2030 2070 M&I Water Supply ($ millions) 1 $6.1 $7.7

Notes: 1 Based on 2015 price levels in accordance with the Water Storage Investment Program Technical

Reference.

Various sources of uncertainty exist regarding the future value of M&I water supplies; particularly in dry years, when Bay Area M&I water purveyors rely on transfers and other mechanisms to meet demands. In addition to water transfers, Bay Area efforts to increase dry year water-supply reliability have considered desalination, recycled water, and aquifer storage and recovery. These actions typically have a higher cost per unit of water than water transfers. Population growth and climate change are major factors likely to drive the trend toward an increase in the value of water in the future. The population of the State of California is anticipated to grow, increasing demand for water, and making it increasingly difficult to provide adequate water supplies to maintain a healthy industrial and agricultural economy, while also protecting the environment. Shifts in agricultural cropping patterns from field crops to high-valued permanent crops may contribute to future increases in the value of water, and may result in a “hardening” of water demand in the agricultural sector. As this trend continues, it is likely that agriculture will have less flexibility during dry years to transfer water supplies to M&I users. A similar hardening condition may develop in the municipal sector, as conservation actions are increasingly relied upon to balance demands in all year types, rather than being reserved for dry years and drought conditions. Compounding these trends is the uncertainty associated with climate change, which may shift the timing and/or availability of water throughout the state. All of these factors, in combination, suggest that the value of water is likely to increase in the future across all water-use sectors.

5.2.3 Additional Information Additional information on the quantification of M&I water supply benefits is included in Chapter 5 of the Benefit Calculation, Monetization, and Resiliency Attachment A5: Quantification Support.




Pacheco Reservoir Expansion Project Chapter 6 Municipal and Industrial Water Quality


CHAPTER 6 MUNICIPAL AND INDUSTRIAL WATER QUALITY

6.1 Physical Benefit Quantification San Luis Reservoir, via San Felipe Division facilities, is the primary delivery route for SCVWD’s CVP supplies. During the summer, high temperatures and declining water levels create conditions that foster algae growth in San Luis Reservoir. The San Luis Reservoir low point issue occurs when the water levels decline to the point that algae blooms at approximately 35 feet above the top of the CVP San Felipe Divisions’ Lower Intake. Typically, this point occurs when the Reservoir reaches approximately 300,000 acre-feet of storage. The water quality within the algal blooms is not suitable for M&I water users relying on existing water-treatment facilities. In these circumstances, SCVWD cannot treat San Luis Reservoir water with its existing treatment facilities—at the Santa Teresa and Rinconada Water Treatment Plants—because of taste and odor issues generated by dense algae blooms at the Reservoir. Currently, SCVWD is completing the Rinconada Water Treatment Plant Reliability Improvements Project, to address that plant’s capacity to treat reservoir-generated, taste-and-odor causing compounds. The expansion of Pacheco Reservoir would avoid the consequences of the San Luis low-point issue by taking delivery of SCVWD supplies earlier in the season and storing these supplies in the expanded Pacheco Reservoir, using additional local supplies developed through expansion of the Pacheco Reservoir, and using the Project as a source blending water when needed.

To quantify these physical benefits, CalSim II and the SCVWD WEAP models were used to evaluate the number of months that a San Luis Reservoir low point issue would be avoided with the Project, under both 2030 and 2070 future conditions. These evaluations considered: 1) available capacity in the expanded Pacheco Reservoir, or other SCVWD storage facilities (e.g., Anderson Reservoir), and 2) available capacity in the existing Pacheco Conduit to transfer CVP allocations from San Luis Reservoir. These results are summarized by water year type in Table 6-1. Under without-Project conditions, the low-point issue occurs in 73 months in 2030 future conditions, and in 109 months in 2070 future conditions. Under with-Project conditions, the low-point issue can be avoided in all months under both 2030 and 2070 future conditions.



Table 6-1. Improved M&I Water Quality Through Reduced Incidence of Low Point Issues in San Luis Reservoir for 2030 and 2070 Future Conditions

Water Year Type1

2030 Future Conditions 2070 Future Conditions With-

Project2 (months)

Without- Project2 (months)

Difference (months)

With- Project2 (months)

Without- Project2 (months)

Difference (months)

Wet 0 12 -12 0 18 -18 Above Normal 0 17 -17 0 13 -13 Below Normal 0 6 -6 0 15 -15 Dry 0 18 -18 0 35 -35 Critical 0 20 -20 0 28 -28 Total All Years 0 73 -73 0 109 -109 Notes: 1 Water year types based on the Sacramento Valley water year hydrologic classification. 2 Values were derived from CalSim II and Santa Clara Valley Water District’s WEAP model. Key: WEAP = Water Evaluation and Planning System

6.1.1 Additional Information Additional information on the quantification of M&I water quality benefits and costs is included in Chapter 6 of the Benefit Calculation, Monetization, and Resiliency Attachment A5: Quantification Support.


6.2.1 Economic Methods Section 5.3 of the WSIP TR identifies three methodologies for monetizing economic benefits, including avoided cost, alternative cost, and willingness to pay. The approach to estimate the M&I water quality benefits considers a least-cost means of providing at least the same amount of physical benefit as the most likely alternative, in the absence of the Project. This method is consistent with the “alternative cost” method identified in the WSIP TR. The alternative project that would have the same benefit to SCVWD for addressing the San Luis Reservoir low point issue is the Santa Teresa Treatment Plant Upgrade Project. As mentioned above, upgrades to the Rinconada Water Treatment Plant are ongoing, and therefore, not included in the costs for the most likely alternative. Currently, SCVWD is the lead CEQA agency for the San Luis Low Point Improvement Project (SLLPIP), which is tasked with addressing the low-point issue. Reclamation and SCVWD have prepared an administrative draft Environmental Impact Statement/Environmental Impact Report and Feasibility Report, which is currently undergoing internal review. Based on studies to date, upgrades to the Santa Theresa Water Treatment Plant have been shown to be the most cost-effective means of addressing the low-point issues. Therefore, monetary benefits are based on the cost of the proposed Santa Theresa Water Treatment Plant upgrade.

6.2.2 Economic Analysis Upgrades to the Santa Theresa Water Treatment Plant include new technological retrofits to treat the algae-laden water that is present during low-point events. The identified upgrade includes implementation of a raw water ozonation process at the Santa Teresa Water Treatment Plant, to address the issues associated with the quality of the raw water delivered to the plant during San Luis Reservoir low-point events. Implementation of a raw water ozonation process



would improve the plant’s ability to use water from the San Luis Reservoir during low-point events for the following reasons:

• Ozonating the raw water entering the plant will oxidize the algae cell metabolic byproducts in the raw water, eliminating taste and odor compounds.

• Ozonating the raw water entering the plant will lyse the algae cells in the raw water, reducing the size of the algal cellular material, which will improve coagulation, sedimentation, and filtration efficiency.

Costs for the proposed Santa Theresa Water Treatment Plant upgrades are summarized in Table 6-2. The annualized cost for the Santa Theresa Water Treatment Plant upgrades is $3 million which includes amortized capital costs, amortized interest during construction, annual operations, maintenance and repair, and annualized replacement costs. The monetized benefits for M&I water quality would be the same for both for 2030 and 2070 future conditions.

Table 6-2. Alternative Cost for M&I Water Quality Benefits Based on Santa Theresa Water Treatment Plant Upgrades

Item Cost ($ millions)1, 2

Capital cost 42 Interest during construction 2.4

Annualized Costs Amortization of capital costs2 1.5 Amortization of interest during construction2 0.1 OM&R 0.5 Replacement 0.8

Annualized Costs 3 3.0 Notes: 1 Based on 2015 price levels in accordance with the Water Storage Investment Program Technical

Reference. 2 Based on a 3.5 percent discount rate in accordance with Water Storage Investment Program

Technical Reference. 3 All numbers are rounded for display purposes, and therefore line items may not sum to totals. Key: OM&R = Operations, maintenance, and repair

6.2.1 Additional Information Additional information on the quantification of M&I water quality benefits and costs is included in Chapter 6 of the Benefit Calculation, Monetization, and Resiliency Attachment A5: Quantification Support.




Pacheco Reservoir Expansion Project Chapter 7 References


CHAPTER 7 REFERENCES National Marine Fisheries Service. 2013. South-Central California Steelhead Recovery Plan.

Santa Clara Valley Water District. 2015. Urban Water Management Plan.

.

Pacheco Reservoir Expansion Project Chapter 7 References



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