January 2012, Issue 56: Editors’ Notes

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This editorial is from the January issue of M&A’s Arizona Water Policy Update.

The future cost of water supplies may encourage Arizona communities to implement aggressive demand-side policies and rates.

In October 2011, the Water Resources Development Commission (WRDC) wrapped up an enormous statewide planning effort that resulted in six reports on water supply planning. The reports are dense with data, assumptions, projections, and conclusions about Arizona’s water future. Although legislative recommendations are still under development, the work thus far provides an interesting glimpse into the water supply challenges that lie ahead for Arizonans.

One of the most significant challenges is the cost of developing new supplies. To frame this challenge, the committee updated the cost estimates for four proposed projects that would provide water to communities outside the CAP service area. These projects are in Coconino County, the Verde River basin, Payson and the Mogollon Rim region, and the Sierra Vista area. The capital and annual O&M cost estimates for each project are shown on the chart below. The finance committee’s report concludes that getting water to these areas will be “extremely expensive.” In fact, the magnitude of these preliminary infrastructure cost estimates is staggering, especially when compared to the cost of building and operating the CAP pipeline and other proposed water supply augmentation projects, including the CAP canal expansion and the Yuma and Carlsbad desalination plants. It is almost certain that water developed for these areas will be much more expensive than what users are currently conditioned to paying for, in terms of both upfront capital and annual O&M costs.

It’s easy to see the negative side of expensive water projects. They compete with other pressing needs for tax dollars, they force difficult lifestyle and business enterprise decisions, and they may compound the impacts of the recession.

But their big price tag may have some demand-side silver linings. For example, they may encourage would-be buyers to build strong conservation incentives into rate structures and push communities to account for all groundwater withdrawals, including those from exempt wells. They may also promote creative alternative solutions to the water-supply-and-demand imbalance that is developing at current prices. Less-populated areas of the state may be motivated to implement demand-side policies that will shape these areas in ways that have been unachievable under previous water laws.

Juliet M. McKenna, MS, PG | Taylor D. Shipman, MS | Mark H. Myers, MBA