Economic Analyses Conducted on the Bay Delta Conservation Plan - David Sung, Lead Economist BDCP Program - Sept. 12, 2013

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Economic Analyses Conducted on the Bay Delta Conservation Plan - David Sung, Lead Economist BDCP Program - Sept. 12, 2013

  1. 1. 1 Antitrust/Competition Commercial Damages Environmental Litigation and Regulation Forensic Economics Intellectual Property International Arbitration International Trade Product Liability Regulatory Finance and Accounting Risk Management Securities Tax Utility Regulatory Policy and Ratemaking Valuation Electric Power Financial Institutions Natural Gas Petroleum Pharmaceuticals, Medical Devices, and Biotechnology Telecommunications and Media Transportation Copyright © 2012 The Brattle Group, Inc. www.brattle.com Economic Analyses Conducted on the Bay Delta Conservation Plan Presented by: David Sunding September 12, 2013
  2. 2. 2 Outline Background Economic Analyses Conducted Results Public Comments
  3. 3. 3 Background Thomas J. Graff Professor of Natural Resource Economics at UC Berkeley • Founder, Berkeley Water Center • Leader, NSF Research Center on Urban Water Systems Principal, The Brattle Group • National Leader, Environment and Natural Resources Practice • Clients: corporations, utilities, federal government, states
  4. 4. 4 Economic Analyses Economic Benefits of the BDCP (April 2013) • Foundation is work on shortage losses done for ACWA, CUWA, SWC and MWD • Analysis compares aggregate benefits to costs to determine the economic feasibility of the Proposed Action Analysis of Take Alternatives (June 2013) • Compare economic benefits and costs of alternative configurations of the BDCP • Goal is to assess “practicability” of the alternatives Statewide Economic Impacts (August 2013) • Consider the economic impacts to various interests in the State • Focus on a large number of Delta issues
  5. 5. 5 Benefits of the BDCP to State and Federal Contractors
  6. 6. 6 Benefits Analysis Assumptions BDCP construction is assumed to begin in 2015 BDCP operations are assumed to begin in 2025 and continue to 2075 Impacts are calculated relative to two Existing Conveyance scenarios (High and Low Outflow) All present value impacts are in 2012 $ (millions), and are discounted using 3% real discount rate
  7. 7. 7 Water Supply Impacts of the BDCP
  8. 8. 8 No-BDCP Benchmarks BDCP incorporates a “decision tree” framework ♦ High outflow (low water supply) ♦ Low outflow (high water supply) High and low outflow scenarios incorporate different environmental flow requirements Developed corresponding scenarios if the BDCP is not implemented ♦ Apply the same requirements to the existing conveyance and habitat ♦ Difference between the BDCP and no-BDCP cases isolates the benefits of new conveyance and habitat
  9. 9. 9 Water Supply Assumptions BDCP ♦ High outflow: 4.7 maf ♦ Low outflow: 5.6 maf Existing Conveyance ♦ High outflow: 3.5 maf ♦ Low outflow: 3.9 maf Average deliveries over past 20 years: 5.3 maf The BDCP stabilizes project deliveries and prevents future declines caused by more restrictive regulations
  10. 10. 10 Total SWP Deliveries 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Acre-Feet (millions) Percent Frequency Over Hydrologic Run Total SWP Deliveries* (Probability of Exceedance) BDCP Proposed Action High-Outflow Scenario Existing Conveyance High-Outflow Scenario BDCP Proposed Action Low-Outflow Scenario Existing Conveyance Low-Outflow Scenario Note: Total SWP deliveries in this graph only include Table A, Article 21, and Carryover.
  11. 11. 11 Water Quality Impacts
  12. 12. 12 Water Quality Impacts Two models used to estimate salinity - related benefits ♦ Lower Colorado River Basin Water Quality Model ♦ South Bay Water Quality Model Main variables ♦ Total dissolved solids (TDS) concentration ♦ Water deliveries ♦ Costs to users ♦ Demographic characteristics Evaluates reduced salinity impacts on ♦ Useful life of appliances ♦ Taste ♦ Cost to industrial and commercial customers
  13. 13. 13 Seismic Risk
  14. 14. 14 Estimating Benefits of Seismic Risk Reduction Calculate seismic risk benefits based on a one year outage reference case Assume 2% probability of occurrence each year Marginal values taken from the water supply impact models Post-earthquake water supplies provided by MWD
  15. 15. 15 Benefits and Costs of Take Alternatives
  16. 16. 16 Take Alternatives Considered Take Alternative Description Proposed Action Dual conveyance with Intakes 2, 3 and 5 A: W Canal 15,000 cfs Dual conveyance with west canal alignment, Intakes W1 through W5 B: Tunnels 6,000 cfs Dual conveyance with Intakes 1 and 2 C: Tunnels 15,000 cfs Dual conveyance with tunnels and 5 intakes D: Tunnels 3,000 cfs Dual conveyance with Intake 1; reduce tidal communities restoration to 40,000 acres E: Isolated 15,000 cfs Isolated conveyance with 5 intakes F: Through Delta Through Delta conveyance with channel modifications and different intake locations G: Less Tidal Restoration Reduce tidal restoration to 50,000 acres H: More Restoration Increase tidal restoration to 75,000 acres; floodplain restoration to 20,000 acres; channel margin enhancement to 40 miles I: More Spring Outflow Increase spring outflow to 44,500 cfs
  17. 17. 17 Present Value Benefits and Costs ($ millions) Alternative Description Total Benefits and Costsa, b Alternative Facility Size (cfs) Deliveries (MAF) Total Benefitsc Total Costsd Net Benefits BDCP Proposed Action High-Outflow 9,000 4.705 $18,011 $13,328 $4,684 BDCP Proposed Action Low-Outflow e 9,000 5.591 $18,795 $13,343 $5,452 A: W Canal 15,000 cfs 15,000 5.009 $23,820 $10,789 $13,030 B: Tunnels 6,000 cfs 6,000 4.487 $14,967 $12,123 $2,844 C: Tunnels 15,000 cfs 15,000 5.009 $23,820 $15,381 $8,438 D: Tunnels: 3,000 cfs 3,000 4.188 $8,918 $10,039 -$1,121 E: Isolated 15,000 cfs 15,000 3.399 -$7,531 $15,436 -$22,967 F: Through Delta N/A 4.172 $9,301 $4,887 $4,415 G: Less Tidal Restoration 9,000 4.705 $18,011 $13,146 $4,865 H: More Restoration 9,000 4.705 $18,011 $13,219 $4,792 I: More Spring Outflow 9,000 4.338 $13,508 $13,182 $326 Notes: a Construction is assumed to begin in 2015. BDCP operations are assumed to begin in 2025. b All values are in 2012 $ (millions), and are discounted to present value using 3% real discount rate. c Benefits are calculated out to year 2075. d Costs are calculated out to year 2075. e Benefits for the BDCP Proposed Action Low-Outflow Scenario are calculated relative to the Existing Conveyance Low-Outflow Scenario, which assumes Scenario 6 operations, no Fall X2, no north Delta diversions. cfs = cubic feet per second; MAF = million acre-feet
  18. 18. 18 Statewide Economic Impacts Study Released on August 5, 2013 Addresses several categories of economic impacts ♦ Construction, restoration, O&M stimulus effects ♦ Changes in the Delta • Recreation • Traffic congestion • Air quality • GHG emissions • Delta agriculture • Commercial fishing • Etc. ♦ Impacts of improved water supply reliability

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