Power Drain

Big Ag's $100 Million Energy Subsidy

Wednesday, May 30, 2007

Renee Sharp

Power Drain

Big Ag's $100 Million Energy Subsidy

Every year, the Central Valley Project (CVP) moves more than 2 trillion gallons of water - about 18 percent of California's fresh water supply - to thousands of farms in the state's arid heartland. Massive pumps push the water through 1,437 miles of canals. The electricity used in one year to move water around the CVP would power all of the homes in Chico for more than 18 months, and at current Pacific Gas & Electric Co. rates, cost customers more than $100 million.

But farms in the CVP, the largest taxpayer-funded federal irrigation system in the country, pay next to nothing for the power that provides their lifeblood. Rates for the staggering amount of electricity needed to move CVP water are not affected by the volatile energy market that has hit other California power customers since 1992, nor are they regulated by state or federal agencies.

In a 15-month investigation, Environmental Working Group (EWG) found that in 2002 and 2003 some of the nation's largest and richest farms paid for CVP power at just a fraction of what PG&E's residential, industrial and agricultural customers paid. The rock-bottom rate the CVP charges agribusinesses amounts to an energy subsidy worth more than $100 million a year, bankrolled by U.S. taxpayers. That's how much more agribusinesses in the CVP service area would pay for electricity from PG&E; the rates paid by PG&E residential customers are even higher.

 

CVP Farmers get rock-bottom power rates

 

 

Source: [4, 20]  

 

Through the federal Freedom of Information Act, EWG obtained U.S. Bureau of Reclamation documents that enabled us to calculate for the first time the rate paid by CVP agribusinesses and the value of their power subsidy.

 

EWG found:

  • In 2002 and 2003 CVP agribusinesses paid only about 1 cent per kilowatt-hour (kWh) for electricity used to transport irrigation water.
  • CVP power rates were 10 to 15 times lower than PG&E's industrial, agricultural, and residential power rates during this time period.
  • In 2002 and 2003 CVP agribusinesses received power subsidies worth $115 and $105 million, respectively, when compared to PG&E's agricultural electricity rates.
  • The power that the Bureau of Reclamation sells to CVP agribusinesses for the storage and transportation of Project water is essentially unregulated. No government agency, other than the Bureau itself, oversees its rates.
  • One CVP water district gets more power subsidies than all others combined: Westlands Water District, which is dominated by a handful of large cotton growers in Fresno and Kings counties. In 2002 alone Westlands' power subsidies were worth more than $71 million, an average of $165,000 per farm.

The Bureau often downplays the amount of energy it takes to run the CVP, pointing to the fact that the Project's hydroelectric plants generate about five and a half billion kWh each year compared to the approximately 1 billion kWh required to pump irrigation water around the system. Yet this argument ignores the fact that while millions of municipal and industrial users benefit from the "left over" power, fewer than 7,000 private agribusinesses benefit from the power used for pumping.

And while Congress intended to subsidize agricultural water to some degree when it authorized the construction of federal water projects in the early 1900's, the current situation in the CVP is radically different than what the lawmakers envisioned. Congress specified that water subsidies should only be given to small family farms, yet today corporate agribusinesses thousands of acres in size are receiving federal subsidies. The original purpose of the subsidies - to help settle the then sparsely populated Western US - is also clearly obsolete.

Moreover, many CVP agribusinesses are enjoying not just one kind of government subsidy, but several. In addition to federal energy subsidies, Department of Agriculture data show that from 1995 to 2004, CVP agribusinesses received more than $890 million in direct commodity payments, mostly for cotton and rice. An earlier EWG investigation conservatively estimated the value of CVP water subsidies at $416 million in 2002. In total, federal subsidies to the CVP easily top more than half a billion dollars a year and could well reach $1 billion Ð all at taxpayers' expense.

Meanwhile, the CVP has racked up many other real costs, both ecological and economic. More than half of the Trinity River's water is rerouted from its original course and diverted into the Sacramento River to be used for irrigation. Massive pumps from both the CVP and the State Water Project reverse the flows in the Sacramento-San Joaquin Delta and severely impact fish populations. The Friant Dam drained a 63-mile stretch of the San Joaquin River of water, preventing it from reaching its terminus for parts of the year and destroying a once teaming salmon fishery, for the sake of cheap irrigation water.

Billions of dollars have already been spent trying to repair some of this ecosystem damage. Undervaluing CVP power only adds to these costs. If you have a water delivery system that requires massive amounts of pumping, and you undervalue the power used for this pumping, this leads very directly to the undervaluing of the water itself. Undervaluing of any resource leads to overuse. More water being used for irrigation means less water being left for the environment and less power being available for other uses. This is a particularly pressing issue considering that since the botched deregulation of the California electricity market in 1992, the volatile energy market has caused periodic brownouts in the state's major cities and spurred a push to build new power plants.

Recommendations

  • CVP agribusinesses should be required to pay prices approximating market rate for the power used to store and move irrigation water. A federal agency should regulate power rates to ensure system fairness, and should make these rates publicly available.
  • CVP contractors, and contractors in other federal water projects, should not be allowed to "double-dip" and "triple-dip" on federal subsidies. The CVP farms that are getting the greatest share of power subsidies farms are the same ones that are enjoying a disproportionate share of water and crop subsidies. It's time to end these inherently conflicting subsidies.
  • State and federal regulators and lawmakers must make the connection between water policy and energy policy. This is particularly important in respect to decisions about retiring tainted cropland in Westlands Water District, which could free up substantial amounts of water and energy for other uses.

 

Findings

While California struggles to find enough affordable energy and water to meet its needs, agribusinesses in the Central Valley are getting taxpayer-funded power subsidies worth more than $100 million a year to transport irrigation water, according to an Environmental Working Group (EWG) investigation that calculated, for the first time, federal power subsidies given to each of the almost 100 water districts in the Central Valley Project (CVP).

Irrigated agriculture consumes a staggering amount of energy. With the electricity needed to move agricultural water around the CVP in one year, all of the homes in Chico could be powered for more than 18 months.1[1,2] As California consumers struggle to pay rising energy bills and the state scrambles to find adequate energy supplies, 800 million to 900 million kWh a year are given away to agribusinesses almost for free, creating a massive federal subsidy that discourages both energy and
water conservation. [3,4]

EWG calculated power subsidies in the CVP for the years 2002 and 2003 by comparing the electricity rates Bureau of Reclamation charged agribusinesses to those charged by Pacific Gas & Electric (PG&E), the major power provider in the CVP service area.

We found:

  • CVP agribusinesses paid only about 1 cent per kilowatt-hour (kWh) of electricity used to transport irrigation water.
  • CVP power rates were 10 to 15 times lower than PG&E's industrial, agricultural, and residential power rates. They were 11 to 17 times lower than the industrial and residential rates of the five largest power suppliers in California.2

Table of CVP power rates

 Source: [4, 20, 23]

  • In 2002 and 2003 CVP agribusinesses received power subsidies worth $115 and $105 million, respectively, when compared to PG&E's agricultural electricity rates.
  • One CVP water district gets more power subsidies than all others combined: Westlands Water District. In 2002 alone Westlands got more $71 million in power subsidies Ð an average of $165,000 per farm to a district that includes some of the nation's biggest and richest agribusinesses.

Table of CVP water districts

Note: Districts ranked according to average subsidy received in 2002 and 2003    
Source: [4, 17-20]

 

  • Federal power subsidies come on top of federal water and crop subsidies worth hundreds of millions more dollars each year. All told, the annual federal subsidy to CVP farms easily exceeds half a billion dollars, and could well top $1 billion.

 

1According to the Department of Energy, in 2005 the average per capita residential electricity consumption in California was 572 kWh per month.
2Comparison to five largest power providers was only conducted for 2003 due to data availability.

 

How the CVP Works

The Central Valley Project stretches 400 miles, north to south, across California, from the Cascade Mountains near Redding to the Tehachapi Mountains near Bakersfield. It is anchored by six major dams on the Sacramento, Trinity, American, Stanislaus, and San Joaquin rivers. [5] These dams alone would be enough to radically reshape the hydrology of California, but they are only the first piece of a complex water storage and delivery system.

Overall, the CVP encompasses 20 dams and reservoirs, 9 major canals, dozens of pumping plants, and 11 hydropower plants, in addition to a vast network of smaller canals, conduits, tunnels and other facilities that divert the natural of flow of water in the state to a staggering degree. [5] The volume of water carried by the CVP each year is staggering, amounting to more than 2 trillion gallons, or 18 percent of the state's fresh water supply. [6,7] The CVP is comprised of such a dizzying array of interconnected features that trying to understand how the system operates is challenging. Yet it is key to understanding how energy – and energy subsidies – power the Project...

  • Historically, 90 percent of the Trinity River's water has been diverted through dams, reservoirs, and massive tunnels bored into the Trinity Mountains. Although a recent court decision has reduced these diversions, today still more than 50 percent of the river does not flow to the North Coast as it has for millennia – but instead is rerouted into the Sacramento River. [8] Some of the rerouted water is pumped into the Tehama-Colusa, Corning, and other smaller canals that serve Colusa, Glenn, Shasta, Tehama and Yolo counties. A series of pumping stations move this water into the canals, and send it trudging along a distribution area more than 150 miles long. The remaining diverted Trinity River water flows down the Sacramento River into the Sacramento-San Joaquin Delta where it is captured by another set of CVP pumps and canals. [9]
  • The Tracy Pumping Plant on the Sacramento-San Joaquin Delta sucks massive quantities of water out of the Delta, lifts it 197 feet, and pushes it into the 117-mile-long Delta-Mendota Canal that serves irrigation water to Western San Joaquin Valley. [10] With its six pumps, each powered by a 22,500-horsepower motor, the Tracy Plant alone accounts for 46 percent of the energy used by the CVP each year for moving and storing water. [11] In late spring, when the least amount of pumping is required, the Tracy Plant pumps about 600,000 gallons of water per minute out of the Delta. At the height of summer, when the pumps are working at their maximum, the pumping rate increases to about 2 million gallons per minute. [12]
  • In addition to the federal pumping facilities in the Delta, the State of California has its own set of eleven pumps that take water from the Delta near the Tracy Plant. (The operation of these two sets of pumps, as well as certain other CVP and SWP activities, are coordinated according to an official 1986 agreement between state and federal agencies.) The water is then sent south to the Central Valley and Southern California via State Water Project (SWP) canals. The CVP and SWP pumps are so powerful that together they actually reverse the Delta's natural flow of water during certain times of the year. [11] The damage to fish in the Delta is severe. The reverse flows confuse salmon as they attempt to migrate to their spawning grounds, and the pumps suck in and kill thousands of fish each year - including endangered Chinook Salmon and Delta Smelt. In April, California's Superior Court found that the Department of Water Resources was violating the state's Endangered Species Act (ESA) and ordered the Department to "cease and desist from further operation" of the SWP pumps if it could not comply with the Act within 60 days. [13] A similar case is pending in federal court over the operation of the CVP pumps.
  • Seventy miles downstream from the Tracy Pumping Plant, an intake channel leading off the Delta-Mendota Canal feeds into the O'Neill Pumping Plant. Here, six 6,000 horsepower pumps lift water 45 feet into a reservoir called the O'Neill Forebay, where it merges with water from the California Aquaduct. Eight massive pumps lift water out of the O'Neill Forebay 297 feet into the San Luis Reservoir, the largest off-stream storage reservoir in the country. The 138-foot-wide San Luis Canal, run jointly by the State of California and the federal government, extends 103 miles southeast from the O'Neill Forebay and serves irrigation water to the Western San Joaquin Valley. At two different points along the San Luis Canal, six powerful pumps lift the water again to a higher elevation, and another eight pumps push water into the Coalinga Canal. Westlands Water District is the major CVP user of the water in both the San Luis and Coalinga Canals. [14]
  • The Friant Dam on the San Joaquin River feeds water into the 152 mile-long Friant-Kern Canal and the 36 mile-long Madera Canal that provide irrigation water to the Southern Central Valley. While this unit has fewer pumping-related concerns than other parts of the CVP, its environmental impact has been no less severe. [15] Before the Friant Dam was completed in 1942, the San Joaquin was home to a vibrant salmon fishery. Unfortunately, the dam not only blocked the salmon's natural spawning route, but massive water diversions for agriculture drained a 63-mile stretch of the river for more than half a century and prevented the San Joaquin River from actually flowing into Sacramento-San Joaquin Delta for much of the year. In 2006, an 18-year lawsuit was finally settled requiring the Bureau of Reclamation to restore at least some amount of water to the San Joaquin River year round. [16]

The Bureau of Reclamation, the federal agency that manages the CVP, often boasts of the 5.6 billion kWh of electricity that the Project's hydroelectric dams produce each year. [5] But rarely does the agency mention the vast amount of energy it takes to run the CVP's water delivery operations. Yet EWG's analysis of Bureau data shows that pumping agricultural water around the CVP consumes almost 1 billion kilowatt-hours of electricity each year. [3,4]

For accounting purposes, the Bureau of Reclamation breaks down this energy usage into three different categories: water storage, water conveyance, and direct pumping. [3] It might seem counterintuitive to need electricity for water storage, as we typically think of dams and reservoirs being used to generate electricity rather than consuming it. But, as in the case of the San Luis Reservoir, if a reservoir is located off-stream and uphill from a canal, getting the water into the reservoir takes energy. The basic laws of physics dictate that not all of this energy can be recaptured when the water is later released and used to power turbines. Water storage accounts for about 21 percent of total CVP energy use each year. [3]

The terms conveyance and direct pumping are also confusing. Both refer to the energy required to move CVP water from its source - either the Sacramento-San Joaquin Delta or one of the CVP's many reservoirs - to its ultimate destination. The difference is that conveyance-related pumping, which accounts for 64 percent of CVP energy usage, moves water to a group of downstream users. Direct pumping, on the other hand, serves just a single water district or contractor. It accounts for 25 percent of power use in the CVP each year. [3]

 

Secret Subsidies

The Bureau of Reclamation's website has an impressive amount of information about the inner workings of the CVP: Dozens of spreadsheets - updated every year - that detail the fine print of how the agency calculates water rates, what the components of these rates are for each contractor, and what the overall financial picture of the CVP looks like. [17]

At first glance, this transparency seems to extend to power charges as well. If you know where to look, you can find information on how much different water districts paid for the energy used for water storage and direct pumping in a given year. You can find information on how much of the CVP's capital costs have been assigned to different pumping plants, and which contractors benefit from these plants. You can even find information on how much energy the Bureau predicts the CVP will use from 1981 to 2030. [17]

But here's what the Bureau doesn't tell you.

There's no information on actual conveyance-related power charges, only that these costs were billed directly to water districts. Information on total power charges per acre-foot of water for water storage and direct pumping is folded into the contractor's water rates. And no matter how hard you look, you won't find the actual power rate (cents per kWh) charged to CVP contractors or enough information to calculate it. [17]

Through the Freedom of Information Act, EWG obtained Bureau Reclamation data that allowed us to calculate this rate. We soon understood why the agency wants to keep this information a secret.

 

Calculating power subsidies

To calculate the power subsidies being given to CVP agribusinesses, EWG obtained and analyzed hundreds of pages of federal and state documents. These documents came not only from the Bureau of Reclamation, but also from two state-formed agencies (the Tehama-Colusa Canal Authority and the San Luis-Delta Mendota Water Authority) that help administer water delivery in the CVP.

From the documents we found that all water districts are charged the same power rate in a given year. [4] This is in complete contrast to the situation with water: Different CVP districts have historically paid water rates that vary by orders of magnitude. Although these inequities have decreased since the signing of new long-term water contracts over the last two years, there are still great discrepancies between one district's price for water vs. another. For example, the 2007 contract rate for the Banta-Carbona Water District is $27.34 per acre-foot, which is about half the $56.72 per acre-foot contract water rate for Pacheco Water District, even though both districts get water from the Delta-Mendota Canal. [17]

What was startling was the astounding low price CVP districts were paying for the power used to store and transport irrigation water: just 1.1 cents per kWh in 2002, and 0.95 cents per kWh in 2003. [4]

To calculate the value of the subsidy inherent in these low rates, we first tallied up how much electricity each CVP district used in a given year, based on the data obtained from our public records requests as well as documents that are available on the Bureau of Reclamation's website. [4,18,19] We then compared CVP electricity rates to the agricultural electricity rates charged by Pacific Gas & Electric, the major power provider in the CVP service area.

In both 2002 and 2003, PG&E's agricultural power rate was 13.5 cents per kWh - 12 to 14 times higher than what CVP agribusiness pay to move their water. [20] Since the CVP used 926 million kWh of electricity to pump agricultural water in 2002 and 837 million kWh in 2003, this works out to a total power subsidy of $115 million in 2002 and $105 million for those two years, respectively. Notably, PG&E has about 100,000 agricultural power accounts, while the CVP serves fewer than 7,000 farms. [21,22] In other words, if your farm happens to be located within the CVP service area, you are one of the lucky few eligible for a power and water subsidy windfall.

For comparison purposes, it is useful to also consider what non-agricultural customers paid for power. In 2002-2003, PG&E's industrial customers paid 11.5 cents per kWh. In 2003, the industrial customers of the four other largest power providers in California paid between 8.6 and 12.7 cents per kWh.3[23] Residential customers also paid far higher electricity rates than CVP agribusinesses: In 2002 and 2003 PG&E's residential customers paid 14.2 cents per kWh, while in 2003 residential customers of the other four largest power providers paid between 10.1 and 16.3 cents per kWh. [20] (Agricultural power rates were not available for the other four large providers.)

 

3Similar figures were not available for 2002.

 

 

Unregulated Energy

The California Public Utilities Commission (PUC) regulates the electricity rates of privately owned utilities in California. [24] The Federal Energy Regulatory Commission (FERC) regulates the transmission and wholesale sales of electricity in interstate commerce. [25] The CVP is a system built and operated with federal taxpayers' money providing water, and the power generated by it, to California agribusinesses. You might think that the intertwining of state and federal money, resources and infrastructure would result in a complex regulatory regime for CVP power.

Think again.

The power that the Bureau of Reclamation sells to CVP agribusinesses for the storage and transportation of Project water is essentially unregulated when it comes to price. No government agency, other than the Bureau itself, oversees its rates. When we asked Barry Mortimeyer, Reclamation's Power Operations chief, why the agency rolls most of the irrigator's power charges in with their water rates, Mortimeyer told us that the agency wanted to avoid the illusion that their power rates might be regulated by FERC. [26]

This freedom from regulation is not unique: FERC has only limited jurisdiction when it comes to federal power marketing agencies, and the California Constitution prohibits the regulation of municipal utilities in the state. [27,28] But what it means is that the Bureau of Reclamation can provide agribusinesses with rock-bottom power rates – even compared to other users of CVP power – and there is no state or federal agency making sure the rate structure is fair to all.

Last year the California and Oregon Public Utility Commissions helped put an end to a long-standing deal between the Bureau of Reclamation and PacifiCorp, a private electricity company in Oregon, which gave agribusinesses in the Klamath Reclamation Project highly subsidized power rates for decades. [29,30] Under this deal, irrigators were charged rates typically ranging from just 0.5 to 0.7 cents per kWh – in some cases, rates were lower in 2002 than in 1917. [29,31] These subsidized rates did not come close to actually covering the costs of producing the electricity, leaving PacifiCorp's other customers and shareholders to pick up the remainder of the tab. The Oregon Natural Resources Council estimated that in 2002 the Klamath farmers were getting power subsidies worth almost $10 million per year. [31]

In an April 2006 press release, the Oregon Public Utility Commission (PUC) explained how it decided to "replace historically low rates enjoyed by some 2000 irrigators in the Klamath River basin" and move them, over seven years, to "rates similar to those paid by other PacifiCorp irrigation customers." PUC Commissioner Chairman Lee Beyer called the agency's decision "fair and equitable." [29]

CVP agribusinesses are paying power rates only slightly higher than the rate given to most Klamath farmers in 1917. Their annual subsidy is about 10 times higher than the subsidies to the Klamath Project. After 90 years, the Klamath farmers' sweetheart deal was finally terminated after PacifiCorp brought the matter before the two Public Utility Commissions. Yet there is no such body for federal taxpayers to complain to about the subsidized power rates the Bureau is giving to CVP agribusinesses at their expense.

The sources of CVP power subsidies

CVP-generated electricity not needed to pump water is sold to various customers around California through a federal entity known as the Western Area Power Administration (WAPA). Power customers include municipalities, state and federal agencies, and some CVP water districts (for within-district power uses).

Since both the Bureau and WAPA are selling CVP power, and both are required by law to price this power at "cost-based" rates that recover the cost of production but involve no profit, one would expect that the prices charges by these two agencies would be similar if not identical. [32] Far from it: In 2002 and 2003 the median price of CVP power sold by Western was about 2.5 cents per kWh, as compared to the approximately 1 cent per kWh rate the Bureau charged to agribusinesses for water pumping. [33,34]

There are several reasons why WAPA customers pay more for their CVP-generated power, and two out of three of these boil down to subsidies.

First, commercial power customers are required to pay back their allocated CVP construction costs with interest, while agricultural customers are exempted from interest payments. This is essentially a taxpayer-funded subsidy. [35,36]

Second, if the Bureau determines that CVP agribusinesses can not afford to pay their contracted water rates, commercial power users are required to foot the bill for their associated capital repayment debts. Here, the CVP's commercial power customers are subsidizing farmers' water rates – and power rates as well, since the two rates are somewhat integrated. [36,37]

The third reason for the price discrepancy is that, in order to meet customer demand, Western sometimes purchases (more expensive) non-CVP power on the commercial power market and passes these higher costs onto its customers. Such purchases were made in both 2002 and 2003, but this practice has since been discontinued. [38,39]

Why is CVP power sold by Western is still so much cheaper than the power sold by other large public and private power providers? Again, government subsidies.

A 1996 review by the Government Accountability Office (GAO), for example, found that WAPA does not recover the full costs of providing pensions and postretirement health benefits for its employees via its power rates. The nation's taxpayers end up footing the rest of the bill. [40] GAO also noted that Congress has prevented WAPA from recovering certain CVP-related environmental mitigation costs from its customers, which means that these costs are again passed on to taxpayers. [40]

Another reason why WAPA's power prices are low is that, unlike most other utilities, it does not have to pay for fuel – rain and snowmelt are free. But to collect this "free" fuel, the government had to spend several billion dollars constructing dams. Although CVP power users are responsible for paying back some of these capital costs to the federal government, part of the price tag for dam construction was written off as "non-reimbursable" because dams are considered to be providing other societal benefits such as flood control and recreation. [40] What's more, WAPA gets federally subsidized interest rates for the money it does actually pay back to the government. [40] In the end it is the taxpayers end up paying for this so-called "free" fuel.

 

The Biggest Winner: Westlands

EWG found that virtually every water district in the CVP paid for some amount of power during 2002 and 2003 – and received at least some power subsidies. The subsidy value, however, varied tremendously among different districts. While the median subsidy was about $100,000 per district in 2002 and 2003, nine CVP water districts got power subsidies worth more than $1 million in both of these years.

Since the Bureau of Reclamation charges the same power rate for every CVP water district, a district's power subsidy is directly proportional to how much energy it uses in a given year. This latter figure, in turn, depends on several factors: the amount of water delivered to the district in a given year, whether the water can flow downhill to the district or must be pumped uphill, and the elevation to which the water must be pumped if pumping is required. More water and higher elevations mean larger power subsidies.

Westlands Water District uses about 25 percent of the total amount of agricultural water delivered by the CVP in a given year. [22] This is far more than any other single district, so one would expect it to top the list in terms of power subsidies. Because Westlands' water must be pumped so far and so high, the district actually consumes more than 60 percent of the electricity used to deliver CVP water each year. This means that Westlands also gets more than 60 percent of the power subsidies.

EWG's analysis showed that the district received more than $70 million in power subsidies in both 2002 and 2003. Considering that there are only 422 farms in Westlands, this works out to an average of $165,000 in power subsidies per farm. Although EWG was not able to calculate power subsidies at the farm level, it is likely that the Westlands farms that top the list water subsidies are also big winners when it comes to power subsidies. In 2002, the five farms that got the most water subsidies were Woolf Enterprises, Dresick Farms Inc., Burford Ranch, Vaquero Farms, and S & S Ranch. [22]

The Bureau of Reclamation is currently considering retiring farmland in Westlands – perhaps a significant percentage of the land in the District – to help solve long-term drainage problems. [41,42] This could provide the added benefit of freeing up millions of kilowatt-hours of energy each year, since not as much water would need to be pumped for irrigation. This electricity could be sold to other customers and lessen the need for California to build more power plants.4 Sadly, it appears that this opportunity for electricity savings will be lost since the Bureau has indicated that any land retirement deals will not affect the total amount of water allocated to CVP districts.[41,42]

Table of CVP water districts

 

Note: Districts ranked according to average subsidy received in 2002 and 2003
Source: [4, 17-20]

4A recent Natural Resources Defense Council (NRDC) report estimated that retiring 100,000 acres of drainage-impaired land in Westlands could save 71 million kWh of energy via reductions in CVP pumping. However, NRDC noted that this energy would only be saved if: (1) Westlands' water deliveries were also reduced, and (2) the saved water was dedicated for environmental uses rather than being sold to cities or transferred to other agricultural uses. If either of the latter scenarios were to happen, energy usage would likely actually increase in comparison to the current system.[42]

 

 

The Water-Energy Connection

In November 2005 the California Energy Commission (CEC) released a 180-page report explaining how integrating energy use into water planning can save money, reduce waste, protect our environment, and strengthen our economy. The Commission noted that water-related energy use consumes 19 percent of the state's electricity, 30 percent of its natural gas, and 88 billion gallons of diesel fuel every year. The CEC stated: "Not nearly enough has been done to ensure that California's water supply strategies are synchronized, hand-in-hand, with its energy strategies" and emphasized the importance of eliminating this disconnect. [44]

 

"As California continues to struggle with its many critical energy supply and infrastructure challenges, the state must identify and address the points of highest stress. At the top of this list is California's water-energy relationship."

 

The issue of power subsidies in the CVP needs to be an important part of such policy discussions. Cheaper power for the transportation of water in the end means cheaper water, so power subsidies give agribusinesses even less incentive to conserve. Power subsidies also help prop-up the unsustainable practice of pumping water hundreds of miles to irrigate desert land, much of which should never have been farmed in the first place. [42]

Put another way, when you have a water delivery system that requires massive amounts of pumping, and you undervalue the power used for this pumping, this leads very directly to the undervaluing of the water itself. Undervaluing of any resource leads to overuse. And with almost a billion kilowatt-hours of electricity being used each year to store and move millions of acre-feet of water around the CVP, subtle incentives can yield large consequences.

Opportunities for reform

The Central Valley Project (CVP) has helped make California's arid heartland the top agricultural region in the nation. In the process, it also has given rise to the most subsidy-dependent farms in the nation: A relative handful of big agribusinesses who tap taxpayers for hundreds of millions of dollars a year in power, water and crop subsidies.

On top of the power subsidies detailed here, an earlier EWG investigation of state and federal data conservatively estimated the value of CVP water subsidies to be $416 in 2002. [22] And an examination of Department of Agriculture (USDA) data, compiled annually by EWG, showed that many of these same farms are also getting hefty crop subsidy payments - $122 million in 2002 alone, and $891 million from 1995 to 2004. [45]

Congress will be writing a new Farm Bill this year, something that it does only every 5 years. This may be the government's best opportunity to address the problem of giving agribusinesses in the CVP - and other federal water projects - multiple subsidies that are often at cross-purposes with each other. Eleven times since 1982, Congress has considered legislation to prohibit farms from receiving both water and crop subsidies. (None of these bills even considered the additional issue of power subsidies.) Each was blocked by the agricultural lobby. [45]

But with the change in Congressional leadership and the growing realization that the bloated farm subsidy program is actually hurting small farms while helping large agribusinesses, the time could finally be right to limit the number of government subsidies a single farm can receive on the taxpayer's dime.

 

Acknowledgments

Principal authors: Renee Sharp
Editor: Bill Walker
Research Assistance: Simona Carini, Meredith Stechbart, Lauren Stroshane
Databases: Sean Gray
Graphics and web design: Mi-Young Kim

Thanks to Ken Cook and Richard Wiles of EWG, Hal Candee, Lloyd Carter, Byron Leydecker, Ben Miller, and Tom Stokely for their ongoing help with this work.

This report was made possible by grants from George A. Miller and Environment Now. The authors and editor are responsible for any errors.

Methodology: 

EWG requested documents from the Bureau of Reclamation under the Freedom of Information Act (FOIA) that would allow us to calculate the power rate charged to CVP farmers for the transportation and storage of irrigation water. We received a set of documents for fiscal years 2002 and 2003 titled "True Up of Estimated Costs Posted to Actual Costs." These documents contained the "Actual Total Energy" (in kilowatt-hours) and the "Actual Power O&M Expense" (in dollars) for each of the CVP's electricity loads. We derived the CVP power rate by dividing the power expense figure by the total energy figure for each load. We found that the power rate was the same for each load within a given fiscal year, and therefore used this figure as the CVP annual power rate.

Derivation of PG&E power rates

EWG relied on the historical tariff schedules posted on PG&E's website (available at http://www.pge.com/tariffs/electric.shtml#RESELEC) to derive average annual residential, industrial and agricultural power rates for the utility in 2002 and 2003. Specifically, we used the "Residential schedules E-1, EM, ES, ET," "Industrial / General Service (E20)," and "Small Agricultural" and "Large Agricultural" categories. When there were several different power rates charged to various subclasses of customers within a particular category, we used weighted averages based on how much electricity the company expected to sell to the various subclasses in 2006. These latter forecast figures were obtained directly from PG&E.

Derivation of power subsidy figures

For overall annual CVP power subsidy figures, EWG took the total actual Project Use Energy (PUE) costs for fiscal years 2002 and 2003 from Bureau of Reclamation irrigation Schedule B7 (available at http://www.usbr.gov/mp/cvpwaterrates/ratebooks). We then calculated the total number of kilowatt-hours (kWh) of electricity used by the CVP in a given year by dividing the total PUE cost by the CVP power rate for that year. To calculate the overall value of power subsidies in the CVP, we multiplied the total kWh figure by the difference between the PG&E agricultural power rate and the CVP power rate for that year.

For water district-level CVP power subsidy figures, EWG looked separately at water storage, direct pumping, and conveyance PUE costs. Reclamation reports the actual PUE costs for each district for water storage and direct pumping in Schedule B7, so we calculated the subsidy for these components in the same manner described above. For conveyance, however, Reclamation does not report the actual PUE costs in any of their publicly available documents so we had to rely on documents obtained via a California Public Records Act request from the Tehama-Colusa Canal Authority and the San Luis-Delta Mendota Water Authority. From these documents we were able to calculate the total amount of conveyance-related power costs charged to each water district, and subsequently calculate their power subsidy in the same manner described above.

References: 

[1] Energy Information Administration. 2005. Basic Electricity Statistics.
Table 5: Average monthly residential use, by state. US Department of Energy. Available at: http://www.eia.doe.gov/neic/quickfacts/quickelectric.html

[2] City of Chico. 2006. Municipal Service Review. Available at: http://www.chico.ca.us/_mod_resource/content/Planning_Services/
Municipal_Service_Review_(Final)_October_2006/Chap_3_Growth
__Population.pdf

[3] Bureau of Reclamation. 2002 and 2003. Annual Irrigation Ratebooks:
Schedule of Irrigation O&M Costs (Schedule B7). Available at:
http://www.usbr.gov/mp/cvpwaterrates/ratebooks

[4] Bureau of Reclamation. 2002 and 2003. Project Use Energy:
True Up of Estimated Costs Posted to Actual Costs. Obtained via Freedom of Information Act Request.

[5] Bureau of Reclamation. 2007. About the CVP. Available at: http://www.usbr.gov/mp/cvp/about.html

[6] Environmental Working Group. 2004. California Water Subsidies. Available at: https://www.ewg.org/issues/siteindex/issues.php?issueid=5017

[7] California Department of Water Resources. 2005.
California Water Plan Highlights. Department of Water Resources. Bulletin 160-05. Available at:
http://www.waterplan.water.ca.gov/docs/cwpu2005/cwphighlights/highlights.pdf

[8] Friends of the Trinity River. 2007. Trinity Division History. Available at: http://www.fotr.org/tdhistory.html

[9] Bureau of Reclamation. 2007. Central Valley Project: Delta Division. Available at: http://www.usbr.gov/dataweb/html/delta.html

[10] Bureau of Reclamation. 2007. Central Valley Project: Shasta/Trinity River Divisions. Available at: http://www.usbr.gov/dataweb/html/shasta.html

[11] Bureau of Reclamation. 2007. Annual Irrigation Ratebooks:
"Schedule of Irrigation Estimated Project Use Energy Costs, Storage, Conveyance and Out-of-Basin Pumping"
and "Schedule of Estimated Irrigation Project Use Energy Costs Direct Pumping." (Schedules A-10 and A-11.)
Available at: http://www.usbr.gov/mp/cvpwaterrates/ratebooks

[12] Calfed Bay-Delta Program. 2005. Issues with Delta Drinking Water Treatment. Available at: http://calwater.ca.gov/Programs/DrinkingWater/adobe_pdf/Initial_Assessment/
Issues_Delta_Drinking_Water_Treatment_2005.pdf

[13] Watershed Enforcers vs. California Deparment of Water Resources. California Superior Court. Judgement granting peremptory writ of mandate. Filed April 18, 2007. Case no. RG06292124.

[14] Bureau of Reclamation. 2007. Central Valley Project: San Luis Unit. Available at: http://www.usbr.gov/dataweb/html/casanluis.html

[15] Bureau of Reclamation. 2007. Central Valley Project: Friant Division. Available at: http://www.usbr.gov/dataweb/html/friant.html

[16] Martin, G. 2006. Sick San Joaquin River on brink of a new life: Historic settlement will let water flow to delta year-round. San Francisco Chronicle. Thursday, September 14, 2006

[17] Bureau of Reclamation. 2007. Annual Irrigation Ratebooks. Available at: http://www.usbr.gov/mp/cvpwaterrates/ratebooks

[18] San Luis-Delta Mendota Water Authority. 2002 and 2003. Summary Delivery and Cost Information. Obtained by public records act request.

[19] Tehama-Colusa Canal Authority. 5- year water deliveries to agencies: 1997-2001 and 1996-2000. Obtained by public records act request.

[20] Pacific Gas & Electric. 2006. Current and historic electric rates. Available at: http://www.pge.com/tariffs/electric.shtml#RESELEC

[21] Pacific Gas & Electric. 2005. PG&E's Integrated Demand Side Management (IDSM) Strategy for Agricultural Customers. Patsy Dugger, Senior Program Manager Supervisor. Agriculture and Food Processing Program. Available at: http://www.aceee.org/conf/af05/05agduggerIIa.pdf

[22] Environmental Working Group. 2004. California Water Subsidies. Available at: https://www.ewg.org/issues/siteindex/issues.php?issueid=5017

[23] Energy Information Administration. 2005. Electric Sales, Revenue, and Average Price. Tables 6 and 8. US Department of Energy. Available at: http://www.eia.doe.gov/cneaf/electricity/esr/esr_sum.html

[24] California Public Utilities Commission. 2007. PUC Mission. Available at: http://www.ferc.gov/about/about.asp

[25] Federal Energy Regulatory Commission. 2007. About FERC. Available at: http://www.ferc.gov/about/about.asp

[26] Personal communication. March 29, 2007.

[27] Federal Energy Regulatory Commission. 2007. What FERC Does. Available at: http://www.ferc.gov/about/ferc-does.asp

[28] Michaels, R. 1997. Stranded in Sacramento: California Tries Legislating Competitive Electricity. Regulation. The Cato Review of Business and Government. Spring 1997. Available at: www.cato.org/pubs/regulation/reg20n2i.html

[29] Oregon Public Utility Commission. 2006. Commission Sets Rates for Klamath Falls Irrigators. April 12, 2006 press release. Number 2006 Ð 005 UE 170. Available at: http://www.puc.state.or.us/PUC/news/2006/2006005.shtml

[30] California Public Utility Commission. 2006. PUC Adopts Transition Plan for_Klamath Irrigation Project Customers. April 13, 2006 press release. Available at: http://www.cpuc.ca.gov/Published/News_release/55265.htm

[31] Oregon Natural Resources Council. 2002. Rate Payer Ripoff. Electric Power Subsidies in the Klamath Irrigation Project. Available at: www.klamathbasin.info/RatePayerRipoff.pdf

[32] Western Area Power Administration. 2007. Frequently asked questions about power marketing. Available at: http://www.wapa.gov/about/faqpm.htm

[33] Western Area Power Administration. 2002. Statistical Appendix to 2002 Annual Report. Available at: http://www.wapa.gov/newsroom/sa02/sa2002.htm

[34] Western Area Power Administration. 2003. Statistical Appendix to 2003 Annual Report. Available at: http://www.wapa.gov/newsroom/sa03/sa2003.htm

[35] Western Area Power Administration. 2007. About Western: Financial information. Available at: http://www.wapa.gov/about/finance.htm

[36] Wahl, R. 1989. Markets for federal water. Subsidies, property rights, and the Bureau of Reclamation. Resources for the Future. Washington, DC.

[37] US Department of the Interior. 1994. The Impact of Federal Programs on Wetlands. Volume II. Available at: www.doi.gov/oepc/wetlands2/v2ch4.html

[38] Western Area Power Administration. 2002. Annual Report 2002. Available at: http://www.wapa.gov/newsroom/pdf/annrep02.pdf

[39] Western Area Power Administration. 2003. Annual Report 2003. Available at: http://www.wapa.gov/newsroom/pdf/annrep03.pdf

[40] General Accounting Office. 1996. Power Marketing Administrations. Cost recovery, financing, and comparison to non-federal utilities. September 1996. GAO/AIMD-96-145. Available at: http://www.gao.gov/archive/1996/ai96145.pdf

[41] Bureau of Reclamation. 2007. San Luis Drainage Feature Re-evaluation, Record of Decision, March 2007. Available at: http://www.usbr.gov/mp/sccao/sld/docs/sld_feature_reeval_rod.pdf

[42] Environmental Working Group. 2005. Soaking Uncle Sam. Why Westlands Water District's New Contract is All Wet. Available at: https://www.ewg.org

[43] Natural Resource Defense Council. 2004. Energy down the drain: The hidden costs of CaliforniaÕs water supply. Available at: http://www.nrdc.org/water/conservation/edrain/contents.asp

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