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Direct Potable Reuse (DPR) is just too expensive for the MMWD
Recently there has been much excitement about Direct Potable Reuse (DPR). This consists of recycling potable water. After use, the potable water is first treated and then recirculated using the existing Marin Municipal Water District (MMWD) water pipeline infrastructure.
DPR advocates wrote an enthusiastic Marin Voice article within the IJ (October 9th, 2023) on the subject.
We must approach recycled water solution with an open mind
The DPR advocates covered the subject as if MMWD had never heard of DPR. Regarding the economics of DPR, they suggested having an "open mind" to not let costs affect one's decision to adopt DPR.
DPR is well known. MMWD figured out it is way too expensive
MMWD with the assistance of their consultants, Jacobs Engineering (JE), studied DPR and all other water supply options for over a year. MMWD and JE released their findings 13 months ago (see attached September 2022 Study pdf). MMWD and JE uncovered that DPR made for some of the most expensive water supply options. Its costs are on par with the most expensive desalination options. It comes as no surprise that purifying water by eliminating all traces of human excrement (DPR) would be as or more expensive than eliminating salt (desalination).
The table below extracts the relevant information from the Study. It compares the cost of DPR vs. more cost-effective alternatives such as the expansion of existing reservoirs (from 80,000 acre-feet to 100,000 acre-feet), spillway gates, and maximizing purchases from Sonoma.
As shown above, DPR not only has high capital costs. It also has high operating costs. Whenever I share JE cost estimates I get much pushback. I am invariably told to not trust JE estimates. I get it, I am not big on JE's work as outlined in my Medium article below.
How to get your money's worth out of consultants
However, I don't think JE has a negative bias against DPR. Thus, on a relative basis to compare one water supply option vs. another, such comparisons between options are representative.
DPR costs are likely to rise rapidly
Based on current economic trends, all JE estimated costs (now 13 months out of date) could be much higher for several reasons:
a) Capital costs and debt servicing will be higher. JE froze their interest rate cost at 3.00% throughout the entire duration of their study. Rates have gone way up. The current Aa rate for 30-year Munis runs at 4.70% (or 170 basis points over JE's rate assumption).
b) Inflation has not stopped. 13 months later (than the release of the study) all costs have gone up.
c) Electricity costs deserve a special mention. PG&E is considering increasing its rates between 9% to 26% depending on whether the CPUC regulators approve proposals that they shield their lines (9% rate increase) vs. moving them underground (26% rate increase).
As we know, the MMWD has just implemented a massive water rate increase through 2026. As a reminder, this massive rate increase does not even stabilize MMWD's existing huge backlog of infrastructure replacements (pipes, tanks, etc.). And, it does not include any funds for bond financing of the mentioned large water supply options. You can read more about it in the article below.
Why the MMWD needs to implement huge rate increases
MMWD has several low hanging-fruits to shore up the water supply
To shore up its water supply, MMWD has really low-hanging fruits related to implementing basic water management practices. During dry years, MMWD invariably releases a lot more water than mandated by regulation. You can read more about it in the article below.
How the MMWD exacerbated the 2020 - 2021 water crisis
The table and graph above confirm that during dry years, the MMWD released on average over 3,000 AFs more than mandated by regulation to sustain the fisheries! MMWD is more concerned about the fish than the humans.
Additionally, MMWD has always simultaneously bought the minimum amount of water from Sonoma and implemented drastic water conservation to just attempt to get by. As a result, it has left us short of water during dry years. And, has hurt its own revenue stream and profitability to unsustainably poor levels (hence the massive rate increases). That is an inventory management problem, well understood in retail that MMWD Management does not understand (even though I informed them about it). For an explanation of how inventory management applies to the MMWD, please refer to pages 65 - 67 of the attached document 'Water Report December 2022'. From the optimization of Sonoma water purchases, MMWD could easily avail itself with an extra 1,000 to 3,000 AFs per year.The reservoir expansion in addition to the mentioned low-hanging fruits should suffice for the MMWD to have a resilient and adequate water supply infrastructure (we need about 8,000 to 8,500 AF to have a secure water supply, see related analysis starting on pg. 53 of Water Report December 2022). To understand why this is the case, we have to review MMWD rainfall history.
Marin County's rainfall history
The graph above shows the annual rainfall going back to 1878. We can split the rainfall history into the three periods shown below.
Contrary to MMWD Management's belief, our local climate is not getting any dryer. Since 1951, we have gotten a lot more rainfall than during the preceding Dry Period from 1917 - 1950. You can read more about it by referring to the Climate perspective section starting on page 9 of the attached Water Report December 2022.
The NOAA projects that Climate Change will support above-trendline rainfall over the next several decades for Marin County. You can read more about it in the article below.
Is Marin destined to become a desert? Nope
Looking back at the graph on rainfall history. MMWD has experienced water crises when Marin gets less than 35 inches in two consecutive years, and one of the two years gets less than 25 inches or so. This happened during the 1975-1976 and the 2020-2021 periods (highlighted in yellow). Thus, during the Baseline period since 1951, we have had only 2-year droughts (as specified). If we go back to the beginning of the data in 1878, we have had only one single 3-year drought in the late 1920s during the Dry Period. Thus, going back to 1878, we have never had a 4-year drought.
The expansion of reservoirs is a resilient and cost-effective solution
The expansion of reservoirs by 20,000 AFs is substantial. JE considered that this expansion would provide an extra 5,000 AFs per year over a 4-year drought period. Such 4-year droughts have never occurred. Over rare but realistic 2-year drought periods, the reservoir expansion would provide an added 10,000 AFs per year. That's a ton of water.
Our "droughts" are not climate-driven. They are infrastructure-driven
Just to shed more perspective on Marin's climate, see the box plots below disclosing the distribution of rainfall since 1951 for Marin at the Lake Lagunitas location vs. major West Coast cities that people typically associate with a wet climate.
Data for Marin is from MMWD. Data for the cities is from the NOAA.
As shown above, Marin gets even more rainfall than Seattle and Portland. In its driest year (at just above 20 inches) it gets more rain than San Francisco and Spokane during an average year (using the Median)!
So, what we consider a drought in Marin is not a climate phenomenon. Instead, it underlies MMWD's inadequate water supply infrastructure to support 192,500 customers. And, in turn, inadequate infrastructure imposes water scarcity conditions on its customers as if Marin truly experienced climate-driven droughts.
Takeaways
- MMWD is still financially stranded, as it has not raised rates enough to stabilize its infrastructure backlog and fund long-term water supply projects. It will need another round of rate increases. MMWD customers will be frustrated as they believe that no further rate increases are necessary beyond the huge ones the MMWD has just implemented.
- To shore up its water supply MMWD can pick up the low-hanging fruits and more precisely manage its water release for fisheries (3,000 AFs), and optimize its water purchase from Sonoma (1,000 to 3,000 AFs ).
- Expanding the reservoirs, as described, would provide an additional 5,000 AFs in a hypothetical 4-year drought. But, it would provide 10,000 AFs in a realistic 2-year drought.
- DPR at twice the $cost of the water reservoir expansion does not belong to MMWD's long-term and large-scale water supply solution. That's one thing that MMWD & JE have already figured out a year ago.