By April 29, Brown went even further and issued an executive order to cut carbon dioxide emissions 40 percent by 2030 by developing more renewable power that supposedly lessens the power grid’s reliability. Could California experience another power outage as it did in 2011 across the southern part of the state, after a lineman’s error sent high voltage pulsing through lower voltage systems?

So what will it be for the summer of 2015: Brown lawns and rolling power brownouts due to less hydropower availability from drought and more renewable, but supposedly less reliable, green power? CalWatchdog.com posed the question to the operator of the grid, the California Independent System Operator (Cal-ISO), which has a stellar reputation of impartiality and technical competence.

The ISO’s forecast — 2015 Summer Loads and Resources Assessment — concludes that electricity supplies will be adequate for the summer of 2015, even if a heat wave scenario unfolds. And contrary to reports of green power unreliability, the report indicates new solar power projects coming online this summer will add more generation and will moderate peak energy events.

In an email, Cal-ISO spokesman Steven Greenlee also indicated that its new Energy Imbalancing Market would plug a gap in the early morning hours when wind power calms down and late afternoon hours when solar power fades.

According to Cal-ISO, California is likely to have too much power available, resulting in dumping of power. Greenlee said:

“If wind does not subside, then all of the resources combine to produce excess energy — at which time we are bound by grid standards to begin immediately rebalancing supply with demand. We let the market cure the situation, but as a last resort to maintain reliability, the ISO can and will curtail generation by dispatching units to zero output; we want to avoid having to this take this action.”

But what about the prospect for power brownouts mentioned by Moniz and the blackout that occurred during the Southwest Blackout of 2011?

What about brownouts?

Greenlee and Cal-ISO staff responded:

“In the intervening time since September 2011, the ISO internally and with its balancing authority neighbors have completed several reliability enhancements that have made the grid stronger and more resilient. This includes the following:

• “Enhancing the day ahead full network model that includes a representation of the entire Western Interconnection, which supports better congestion and energy balancing in the day ahead and real-time periods, explicitly modeling high voltage direct current links, and implementing a new outage management system that informs grid analysis;
• “Adding detailed network models for the Imperial Irrigation District, NV Energy, APS/Yuma, Western Area Power Administration-Lower Colorado and Sierra Nevada regions, LADWP, Sacramento Municipal Utility District, Modesto Irrigation District and Turlock Irrigation District;
• “Expanding real-time contingency analysis to account for external model changes so operators can see the impact of external systems to the ISO grid as well as increasing the frequency of the analysis to every 5 minutes from 15 minutes intervals previously used; and
• “Implementing procedures to ensure the resources with the correct characteristics are procured to recover from a contingency and be ready for the next contingency as soon as, but not longer than 30 minutes.”

Another part of Cal-ISO’s planning is what is called “Demand Response,” whereby electricity customers voluntarily curtail power usage in the event of peak prices or if grid reliability is threatened.

Small businesses and residents would be asked to curtail

However, Greenlee clarified:

“Demand response programs, we believe, vary in composition of mostly residential and small businesses, are offered and managed by the state’s three investor-owned utilities, but please note the ISO does not have any control of, review privileges, or special insight into these retail programs.”

In sum, Cal-ISO does not expect reduced hydropower availability to materially impact grid reliability for 2015. And neither does it foresee a higher risk of brownouts or blackouts, as technical fixes have been put into place to prevent another power outage such as occurred in 2011. Moreover, new solar power coming online should provide greater grid reliability for summer 2015, although California still mainly relies on natural gas and imported electricity.

The only heightened concerns for the summer of 2015 are grid congestion and wildfires caused by transmission line sag that comes with high temperatures. California utilities have not yet adopted newer transmission line technology that reduces high temperature sag and can double current line carrying capacity.

But does Brown’s plan target where the most water can be saved or is it based on media images of water wasters?

Residents of the Palm Springs area, portrayed as water guzzlers enjoying rounds of golf amid lush landscaping, have been hit with the highest mandatory water cutbacks in the state, 36 percent.

The agencies in this area also serve hundreds of thousands of acres in farmland, and many of the golf courses use recycled water.

The Palm Springs desert area does not have a reservoir water shortage as does most of the state even though the weather is hotter. It does not directly tap northern California water reservoirs for its imported water supplies and can only save a sliver of the overall goal of 1.3 million acre-feet.

The Coachella Valley Water Agency and the Desert Water Agency, with 0.71 percent of the state population, have been asked to generate 1.46 percent of the total water reduction mandate.

By contrast, the city of Los Angeles, serving 10.1 percent of the state population — more than 12 times the combined population served by the desert agencies — would produce 2.97 percent of the water savings under Brown’s plan.

Los Angeles must cut 16 percent of its water usage under the plan.

The desert agencies do use more gallons of water per person, as much as 238 gallons per day compared to 73 gallons per day in Los Angeles.

But they also rely less on imported water.

The Los Angeles Department of Water and Power relies on 88 percent or 286,664 acre-feet of water per year from imported supplies. Conversely, the five water suppliers in the Coachella Valley Water Management Group rely on about 27 percent or 60,000 acre-feet of water imports per year, not including a 300,000 acre-foot allocation of Colorado River water that has not been subject to cuts.

Farmers have been exempted from Brown’s regulations because the agricultural sector has been subject to 100 percent cuts in state and federal water allocations for the past two years.

However, the Coachella agency also supplies water to 72,800 acres of farmland. It serves 120 golf courses, of which only 28 rely on imported water. The Coachella agency is shifting 43 golf courses from groundwater to recycled water.

Comparison of Water Reduction Mandates

Desert Visitors Boost Consumption

Some water providers, mostly in the southern part of the state, have resisted Brown’s water cutback percentage formula, arguing that it fails to reward prior reduced water use, ignores geographic temperature differences and fails to account for areas that use mostly groundwater instead of imported water. It also does not consider that tourists who bolster the economy account for a significant share of water usage in places like the greater Palm Springs area, which has a population of almost 350,000 but sees 11.5 million visitors each year, mainly for golf tourism.

Heather Engle, director of communications and conservation for the Coachella water agency, said the Palm Springs area is not suffering as much as the rest of the state as it mostly relies on its own groundwater supplies.

“We don’t believe our customers are well served by our arguing with the (water reduction) formula,” Engle said. “We’re focusing our effort on ways to achieve the 36 percent goal.”

The funds come from California’s $7.5 billion Proposition 1 Water Bond, approved by the voters last year.

Although it is unlikely that all of the $287.5 million will be used for water purchases to benefit the environment, the Wildlife Conservation Board and the Department of Fish and Wildlife still have yet to determine what they will do with their respective $200 million and $87.5 million bond funding allocations.

The last time California tried a pilot program of purchases of environmental water, it didn’t work out so well.

Interest adds up

Starting in 2000, state and federal water agencies purchased farm water for fish and wildlife using bond funds under a now-defunct state-federal program called CALFED. The Environmental Water Account project was aimed at improving water supply reliability and protecting the Delta ecosystem.

The project followed a major allocation by Congress in 1991: a one-time allotment of 800,000 acre-feet for salmon runs plus another 400,000 acre-feet annually for wildlife refuges without payment for the water. (See page 15). An acre-foot of water – enough to cover one acre of land to a depth of one foot – can supply two to four urban households per year, depending on whether it is a normal or drought year. That same amount can support about one-third an acre of cropland per year.

The use of general obligation bonds to buy water for the environment is controversial because actual financing costs would typically be double the principal amount once interest is included.

Calwatchdog.com spoke with Wes Strickland, a water rights attorney in California and Austin, Texas, about the results of the EWA project. Strickland said EWA was a lose-lose-lose-lose deal for every group involved:

• For environmentalists it did not allocate enough water to alleviate ecosystem stress.
• For farmers it drove up spot market water prices because of reduced supply.
• Southern California cities were thwarted from buying water to bank for dry years.
• State and federal water agencies didn’t accomplish their environmental goals even as the state ran up its budget deficit and exhausted water reserves going into a 2007-2010 court-ordered limit on water pumping.

From this failed experiment, Strickland said California should have learned to make small, incremental water purchases during rainy years to support the environment during years of drought.

$193.4 million

The state and federal taxpayer bill came to $193.4 million for the EWA project, which lasted from 2000 to 2007. More than 2 million acre-feet of water were purchased for environmental uses. (See table below.) According to the California Department of Water Resources:

• $16.8 million came from Proposition 204, a 1996-voter approved state water bond.
• $101.2 million was from Proposition 50 voter-approved state water bond.
• $50.1 million was from the state general fund in 2001.
• $25.3 million came from federal coffers.

Under the program, the government came to dominate the spot market for water.

On average, water purchases under the program made up 43 percent of all spot-market purchases of water each year. By the final year of the program, the government’s purchases comprised 87 percent of all water bought on the spot market.

The average price of water purchased over the seven years was $96 per acre-foot, without bond interest, compared with the current going price of $700 per acre-foot for water transfers from farmers.

At the lower price, the $287.5 million under Prop. 1 would be enough to purchase about 3 million acre-feet of water. As the table below shows, in 2007 California bought 477,000 acre-feet of water for fish runs, and that was deemed insufficient to help migrating fish get to the ocean.

Will there be any water to buy?

Because Lake Oroville has been drawn down below 50 percent of its storage capacity, water cannot be sold by the farmers along the Feather River, which flows into the lake.

The EWA project ended just before the Natural Resources Defense Council filed suit to protect the Delta smelt, prompting court-ordered limits on the amount of water drawn from the fish’s habitat.

Environmental Water Account Purchases, 2001 to 2007

###

 Surprise results

The results of the UCLA study, “Free to Choose: Promoting Conservation by Relaxing Outdoor Water Restrictions,” were surprising to the researchers.

The study, sponsored by the National Bureau of Economic Research, analyzed a sizable statistical sample: 20,000 water customers measured by 1.9 million daily meter readings during different hours of the day to measure temperature and wind effects. The study was conducted in 2008 in an economic boom period and again in 2010 in a depressed period.

The amount of overwatering discovered wasn’t small: 20 to 25 percent of weekly consumption and 30 to 40 percent of peak water usage for the typical customer. The researchers call this wastage “rigidity penalties,” meaning that adhering to rigid outdoor watering schedules results in greater water usage than flexible conservation efforts.

In other words, most of the 35 percent state-ordered reductions in water usage in desert areas such as the Coachella Valley are likely to be offset by overwatering due to conservation efforts.

Assigned watering days ignores desert wind effects

Especially in desert climates, the researchers point out that strict adherence to an official watering schedule requires households to “ignore the conditions such as high wind events that reduce the efficiency of irrigation systems” (p. 3).  As anyone who has lived in the desert can attest, gusting winds and sand storms occur mainly in the summer months peaking in May.  Assigned watering days prevent customers shifting from watering on a windy day to a calm day.

How credible a study is this?  Well, the researchers first “cleaned” 15 percent of their data. Households were dropped from the study with ownership changes, vacant dwellings, significant water pipe leakage and seasonal vacation homes. The study also found it was unlikely that the threat of fines for watering on the wrong days was enough to get customers to comply with the watering schedule. The researchers selected the high desert of Nevada especially because of its uniform hot weather and sparse summer rainfall, which would have otherwise complicated their research findings.

The researchers found the outdoor watering policy in Reno was of “negligible magnitude” (p. 14) and had “no noteworthy residual policy effects” (p. 15), after controlling for frequency and pattern of watering.

“Free to Choose” works best for conservation

The researchers concluded that putting a cap on watering frequency was essential for curbing water consumption. But the “address-based assignment of specific watering days undermined conservation goals” (p. 19).

The implications of the UCLA study for public policy are:

“For policy-makers, our results suggest that adjusting existing OWRs (Outdoor Watering Restrictions) to allow for flexible watering patterns could produce substantial water savings at relatively low implementation costs. Moreover, as inefficiency penalties are highest at low frequencies, our findings also cast doubt on the effectiveness of policies that reduce the number of assigned days under progressively severe drought conditions. In such situations, a frequency reduction combined with a ‘free-to-choose’ policy is likely to promote greater conservation.”

On April 9, the San Diego County Water Authority called on the State Water Resources Control Board to change the formula of water use per person per day that is being used to set mandatory percentages of water reduction. SDCWA said that the state formula would penalize water districts like San Diego that have reduced water usage 12 percent since 1990 despite adding a population gain of 700,000.

Another implication of the UCLA study is that a one-size-fits-all drought policy may be symbolically fair but may not save any real water where the reductions are most targeted in desert resort and retirement communities. As Sacramento Bee journalist Dan Walters has pointed out, Gov. Brown often uses what he calls the principle of “subsidiarity” (home rule) very selectively.  In the case of drought policy, Brown has not adhered to free choice at all even though the UCLA study indicates it would be best for actual water conservation.

Tom Steyer

The Los Angeles World Affairs Council event, April 2, hosted just over 100 people to hear  Steyer and Cisneros discuss climate change and refute the recent poll at the Intercontinental Hotel in Century City,

Steyer emphasized that “three quarters of the public and 97 percent of the scientists believe with us” that global warming is “one of the top three issues” facing the world.

Steyer’s new emphasis is on gaining the support of business leaders and Latinos for global warming. Steyer distributed a glossy, spiral bound brochure titled “Risky Business” about climate impacts on California. The brochure was supported by the Steyer-Taylor Center for Energy Policy and Finance at Stanford.

Implications for CA drought

The event’s moderator Terry McCarthy asked the speakers if global warming had any connection with the California drought? Steyer answered in the affirmative and elaborated that the drought just isn’t about less rainfall and snow but also about rising temperature.

Cisneros added that the water content of California snowpack had decreased from 28 inches to 1.4 inches this year, a 95 percent drop and an all time historical low. But California drought planning is on a 5-year cycle and the 5-year average water content in snow is about 65 percent of normal. Moreover, no mention was made that the Los Angeles Times recently reported California has decades of groundwater supplies available.

Cisneros claimed that the drought was having a negative impact on new housing construction. A fact check, however, indicates that construction is up 13.5 percent as of Feb. 2015 in Fresno, up 17.9 percent in Bakersfield, and up 44.7 percent in Sacramento, all areas hard hit by drought (U.S. Bureau of Labor Statistics 2015).

Rising sea levels

McCarthy asked about the projected sea level rise and its effects on California described in the Risky Business brochure. Cisneros said that the Oakland and San Francisco Airports would be the most affected by a projected sea level rise of 1.5 to 3.5 feet over the next few decades. Cisneros quipped that billionaire Larry Ellison, who is an airplane pilot (and Republican Party contributor), might not be able to land one of his private jets any longer at those airports. The San Francisco Airport is 13-feet above sea level; Oakland Airport 9 feet, 3 inches.

Both speakers spent the night sniping at Republicans about climate change but also solicited businesspersons to get on board with their climate change agenda. Billionaire Eli Broad, who built two Fortune 500 companies, KB Homes and SunAmerica, was in the audience.

McCarthy asked Steyer if combating global warming was “irrelevant” given that China is generating increased worldwide pollution. Steyer said he was in China last week and the U.S. and China signed a global warming pact last year.

Question and answer

The question and answer period was fraught with questions from the audience critical of Republicans about their stances on environmental policies and lauding the two speakers for their efforts on global warming.

One member of the audience commented about “the comical displays” and “clownishness about the future” by Republicans toward global warming. Steyer humorously answered that “he was no expert on the Republican Party,” and offered an “analogy” from Warren Buffett: in the short run history is a popularity contest but in the long run it is an adding machine.

Cisneros said Republicans “are on the wrong side of history” because Republican cities like New Orleans and Houston would be hardest hit by rising sea levels brought about by global warming.

When asked, Steyer denied he was going to pursue supporting an oil severance tax in California in 2016.

That’s the conclusion of an article in the March-April issue of Eureka, a new periodical by the Hoover Institution at Stanford University. The word Eureka, of course, is the state motto of California.

The article is titled “The Politics of Governor Brown’s Climate Change Proposals,” by Carson Bruno, a research fellow on California at Hoover. “In fact, in 2011, allowed renewables plus nuclear and large hydro-electric accounted for 53.1 percent of California’s in-state electricity generation, easily surpassing Brown’s new target,” he wrote.

Bruno clarified in an email to CalWatchdog.com that he only looked at in-state power generation, which included allowed renewables, nuclear and large hydro generation.

And the discrepancy with the official state tally of renewables as not even 33 percent so far is because of the state’s official definition of “allowed renewables.” According to Bruno, California does not include hydro and nuclear power as “allowed renewables” even though they are non-polluting. It also hides its reliance on “dirty” imported power from other states by categorizing it as “unspecified power.”

Bruno said that, if nuclear and hydro power are included, California exceeded the 50 percent green-power threshold in 2011 when the San Onofre Nuclear Power Plant was decommissioned and a substantial amount of green solar power mainly took its place.

Moreover, adding new hydro and nuclear power would be just as clean an alternative as less steady and more expensive solar, wind or geothermal power, according to Bruno. Wind power stops on calm days; and solar power stops at dusk.

Of course, building more hydro means more dams, which is opposed by environmentalists; and more nuclear power is close to impossible after the Fukushima accident in Japan four years ago.

Electricity mix

To fact check Bruno’s numbers, CalWatchdog.com conducted its own investigation into California’s mix of electricity sources since the enactment of AB32, the Global Warming Solutions Act of 2006. Using its authority under AB32, in 2010 the California Air Resources Board mandated 33 percent renewables by 2020.

California not only does not consider hydroelectric and nuclear power as renewable but hides that the state still partly depends on imported coal power from other states that it has re-categorized as “unspecified power.” In 2013, California got 7.82 percent of its power from coal-fired power plants and 12.49 percent from murky “unspecified power,” totaling 20.31 percent.

The California Energy Commission uses this definition: “Unspecified Sources of Power generally include spot market purchases, wholesale power marketing, purchases from pools of electricity where the original source of fuel is undetermined, and null power.”

According to the CEC, “Null power refers to power that was originally renewable power but from which the renewable energy credits have been unbundled and sold separately. Null power is not attributable to any technology or fuel type.”

Renewable Energy Credits

Renewable Energy Credits are also known as Green Tags.  Instead of trading tons of carbon, REC’s trade kilowatt-hours of wholesale electricity from untrackable sources because electrons from coal and green power are all the same.

RECs are a way for municipal power departments and new municipal Community Choice power buying cooperatives to “green wash” their purchases of imported power from outside California. It is a way of allowing imported coal power, that technically doesn’t add to California’s air pollution, to count as “green” and “clean.”

Yet entirely clean nuclear and hydropower are not considered clean.

When RECs are considered in the state green power mix for both in-state and imported power, California already nearly met or exceeded its 50 percent green power goal in 2009 (49.89 percent), 2010 (50.37 percent) and in 2011 (56.55 percent).

Conversely, when RECs are considered as fossil-fueled power instead of “greenwashed,” the proportion of California’s power from fossil fuel sources has shown no substantial reduction.

Percentage of California Power from Fossil Fuels — 2007 to 2013

In-State and Imported Power

California is meeting its current 33 percent green power goal by including solar, wind and geothermal power as green, excluding hydro and nuclear power as green, reducing nuclear power output and “greenwashing” imported coal power from other states.

Finding the above numbers buried in the CEC’s database may be a Eureka moment. But learning that California hasn’t much reduced its proportion of fossil-fueled power after spending billions of dollars on green energy validates Bruno’s conclusion that California’s green energy policy is “not about climate change, it’s about politics.”

The studies give policymakers more information on the choices they will be making.

The first study is by economist John Husing, “Policy Choices & the Inland Empire’s Public Health.” He is the vice president of Economics & Politics Inc., a think tank that studies the Inland Empire. He also produced a PowerPoint summary of his findings, “Public Health, Socio-Economics & Logistics in the Inland Empire.”

Husing cited a University of Wisconsin study that found poor health was attributed to four factors:

• 40 percent socio-economics;
• 30 percent individual health behaviors;
• 20 percent medical care;
• 10 percent environmental causes.

Husing pointed out several “clashes” between socio-economic health and clean air regulations that end up worsening public health:

• Cal-EPA’s ozone reduction goal is not possible unless truck emissions are reduced below what current technology can achieve.

• Cal-EPA’s ozone reduction goal is not possible unless all vehicles in California are electrified. Yet currently, less than 1 percent of all registered vehicles in California are electric, according to SmartGridNews.

• There’s a clash between public health and the California Environmental Quality Act. When CEQA is too rigorously enforced, Husing wrote, it becomes the “Let’s sue until they run out of money act.” When that happens, it increases poverty, but serves such groups a “NIMBYS [Not in My Back Yarders], the Natural Resources Defense Fund, the Center for Biological Diversity … some lawyers, and unions.”

Although air pollution might be reduced, according to Husing, actual public health could be reduced by increasing poverty.

That’s because, citing the Wisconsin study mentioned above, Husing said the environment actually is the lowest on the rung of importance of the four health factors, but “it has been elevated almost to the exclusion of other priorities.”

Warehouses

What happened to manufacturing is now being proposed for trucking and transporting of goods.

In recent years, the Inland Empire has become a giant warehouse for Amazon, Target, Walmart and other companies shipping goods into the Los Angeles basin. Logistics and shipping jobs accounted for 16.7 percent of Inland Empire job growth from 1990 to 2012, and 27.6 percent of job growth from 2012 to 2013.

Husing made the case that it is such modest jobs that lift people out of poverty and into the middle class, and thereby into improved health. “Bluntly, it does our region little good if we create a pristine environment but let people increasingly die of the diseases and behaviors fostered by poverty,” Husing concluded.

Second study: Diesel trucks 

The second study concerns diesel trucks and the California Construction Trucking Association. Joe Rajkocacz, director of governmental affairs for the CCTA, explained the matter in an email to CalWatchdog.com.

He said the CCTA has been embroiled for the last four years in a lawsuit, which it lost, against the California Air Resources Board to stop the mandatory installation of $20,000 diesel exhaust filters on trucks and new, cleaner truck engines. The lawsuit contended the regulations caused undue economic hardship for the trucking industry. The regulations were imposed by CARB under AB32, the Global Warming Solutions Act of 2006.

CARB contended the regulations were needed to make California’s air healthier.

On March 3, the the U.S. Court of Appeals for the Ninth Circuit rejected the CCTA’s appeal on the grounds it was filed in the wrong court. The CCTA, however, claimed it is exempt from California’s air pollution regulations under federal law and that is why it appealed in federal court.

CCTA said it now will appeal the case to the U.S. Supreme Court. And it may take up the matter through other legal channels, such as challenging the science on which the air quality regulations are based. CARB contends exposure to diesel soot (particulate matter) causes premature deaths.

CARB’s science has reportedly been supported by a recent USC study showing that clean air is linked to stronger lungs in children. CARB is touting the USC study as a basis for its air pollution regulations, including on diesel trucks.

However, physicist and health researcher Jim Enstrom, Ph.D., MPH, said in a telephone interview the USC study ignores that children’s immune systems and lung capacity get stronger as they grow older. Enstrom is the author of a 2005 study that found there is no relationship between particulate matter in the air and mortality rates of the elderly.

Rajkovacz said that any relationship between diesel exhausts and mortality “doesn’t exist other than in the minds of rogue environmentalists both within and outside of the California Environmental Protection Agency.”

Future court proceedings will decide the legal issues. But no doubt the controversy of health and prosperity will continue.

But if California does not provide the full allocation to the owners of what are called “senior water rights,” the transfers are unlikely to happen.

Explaining water rights in a general context, according to Jay Lund, water resources professor at the University of California, Davis, “If you’re a senior water right holder, you’re the last to be shorted. So, all the junior water right holders that are junior to you will lose all of their water before you lose a drop.”

On March 10 the Board of Directors of the Metropolitan Water District of Southern California authorized $71 million to secure 70,000 acre-feet of additional raw water supplies via the water market for 2015. However, on March 11, the Chico Enterprise-Record reported rice farmers with senior water rights were predisposed to not transfer water to MWD if their state water allocation this year is cut.

Then on March 14, the Enterprise-Record reported the water transfer would involve a total of 115,000 acre-feet of water from Central Valley rice farmers to Southern California. The Kern County Water Agency would get about 35,600 acre-feet of water.

An acre-foot of water serves about two urban households or about one-third of an acre of farmland per year.

Ted Trimble, manager of the Western Canal Water District, told the newspaper it looked like his district would see cuts.  The deciding factor: If the flows of water into Lake Oroville are below the contract threshold, then his district can receive only half of its water.

The March 1 state water forecast tentatively indicated Western would barely meet the threshold for water supply, said Trimble.

Reservoir inflow

Lake Oroville has increased its historic average capacity from 53 percent in mid-December 2014 to 70 percent as of March 2, 2015. But reservoir inflow has dropped from 5,031 cubic feet of water per second on Feb. 15 to 1,719 CFS on March 12, indicating a slowing of inflow.

Marta Weissman, Director of Research for Statecon, Inc. water economists and consultants, said in an email to CalWatchdog.com the forecasted Federal Central Valley Project water allocation is zero percent to 25 percent.  “If dry conditions persist, CVP contractors whose water supply is based on senior water rights may also see a reduction,” she said.

The Upper Feather River Watershed supplies 3.2 million acre-feet of water per year on average for downstream users, with an average daily flow into Lake Oroville of 5,310 cubic feet per second. In 1997 the inflow to Lake Oroville reached 300,000 cubic feet per second during a storm.

Furthermore, the state water forecast assumes “normal hydrology” of rain until April. As of March 5, 2015, the NOAA Climate Prediction Center is forecasting only a 50 percent to 60 percent chance that favorable but weak El Nino conditions will continue, but could not predict exactly where in the Northern Hemisphere.

The bigger question: Will state and federal water allocations be cut to rice farmers resulting in aborted water sales?

Will farm water allocations be cut?

Water economist Rodney T. Smith, Ph.D., president of Stratecon, Inc. has devised a statistical model posted on his Hydro Wonk website on Feb. 18 that explained about 75 percent of the annual variation in Final State Water Project Allocations. He found that, the more water storage at Lake Oroville at the start of the water year on Oct. 1, and the greater the amount of Northern Sierra rainfall, the higher the allocation of state water for farms and cities.

Smith’s prediction reported Lake Oroville currently has the lowest volume of water since 1990. His 2015 precipitation forecast is better than last year, but still not enough to make up for prior-year shortfalls.

Smith predicted a state water allocation of 21 percent for 2015 for farmers with junior water rights.

There has been much public criticism of rice farmers with century-old senior water rights on the Feather, Sacramento and Yuba Rivers. However, it is those water rights that serve as an unofficial water bank during protracted deep droughts.

In 2014, Western Central Valley farmers with junior water rights had their allocations cut 25 percent, mainly for fish but also to rescue farms with permanent crops such as almonds, walnuts, olives and grapes that cannot be fallowed. MWD bought Central Valley farm water in 1991 and again in 2008.

Overdrafted water

A water transfer between rice farmers and MWD would involve a voluntary transfer of State Water Project water to MWD for urban use and would not tap groundwater.

The main groundwater basin in the Oroville watershed is the Sierra Valley Groundwater Management District, which has a storage capacity of 7.5 million acre-feet of water at a depth of 1,000 feet.

The SVGWMD has been a managed groundwater basin under state law since 1980 and is not listed as a groundwater basin subject to critical conditions of overdraft, as described in the book, “Who Should Be Allowed to Sell Water in California,” by Ellen Hanak, p. 144.

So MWD would not be buying water from an “unmanaged” or over-drafted aquifer.

“Today, an average California home costs $440,000, about two-and-a-half times the average national home price ($180,000). Also, California’s average monthly rent is about $1,240, 50 percent higher than the rest of the country ($840 per month). 

“California is a desirable place to live. Yet not enough housing exists in the state’s major coastal communities to accommodate all of the households that want to live there. 

“Households with low incomes, in particular, spend much more of their income on housing. High home prices here also push homeownership out of reach for many. … The state’s high housing costs make California a less attractive place to call home, making it more difficult for companies to hire and retain qualified employees, likely preventing the state’s economy from meeting its full potential.”

The LAO  prescribed two cures for high-cost housing in already dense coastal areas where frequent environmental opposition to new housing is most rampant.

Higher densities

First, the LAO called for much higher building densities in coastal metropolitan areas, including:

• More than doubling of single family home densities in Los Angeles, Alameda, San Mateo and Santa Clara counties from 4 units per acre to up to 9 units (Figure 10, LAO Report);
• More than doubling townhome and condominium densities in San Francisco from 18 units per acre to 35 to 40 units (Figure 10, LAO Report);
• Building 100,000 additional housing units along the coast each year. This would be the equivalent to building a new city along the coastline with a population of 300,000, or about the size of Riverside or Stockton — each year.

CEQA exemption

Second, the LAO recommends exempting new housing construction from lawsuits under the California Environmental Quality Act for reasons of reduction in traffic congestion and the avoidance of blocked views from “Not-In-My-Backyard” (NIMBY) lawsuits. The LAO report did acknowledge, “CEQA’s complicated procedural requirements give development opponents significant opportunities to continue challenging housing projects after local governments have approved them.” However, the LAO did not bring up the 2013 reforms of CEQA in Senate Bill 743, by then-Senate President Pro Tem Darrell Steinberg, D-Sacramento, for infill development in high-density transit development zones.  SB743 eliminated traditional “auto delay” and “level of service” measures of traffic congestion, as well as any parking impacts, as a basis for determining significant impacts of infill housing development under CEQA. The provisions of SB743 will not become effective until sometime in 2016. The California Infill Building Association, the California Teamsters Public Affairs Council, and the Sacramento County Board of Supervisors, which was seeking relaxation of CEQA for a sports stadium project, supported SB743.  Opposition to SB743 came from the Planning and Conservation League and the Sierra Club. SB743 should help a little with the constructing new dwellings.

Home rule

The LAO also infers that, to lower coastal housing costs, California needs to usurp local “home rule” of zoning densities and the ability to file environmental lawsuits blocking or delaying new housing. But combining higher densities with environmental exemptions for affordable housing could result in even more displacements, especially of people in rent-controlled units in San Francisco, Los Angeles and Santa Monica. The LAO report specifically targeted higher multi-family housing densities in San Francisco to alleviate its current middle-class housing crunch. And the LAO wrote that “local governments limit how much landlords can increase rents each year for existing tenants. About 15 California cities have these so-called rent controls, including Los Angeles, San Francisco, San Jose and Oakland.” But as described by Kriston Capps on CityLab.com of March 17, in “Why Did This Woman Get Stuck with a $6,755 Monthly Rent Hike?” San Francisco landlords are converting rooming houses back to single-family homes to remove the rent controls from their properties. L.A. Curbed on March 18 reported in “Mass Rent-Control Evictions on Rise in Santa Monica” that landlords are taking rent-controlled properties off the market for condominium development or an extensive remodel to resell as jumbo, luxury homes. The LAO report failed to discuss the consequences of displacing lower-income renters, something already rampant in highly dense coastal cities. In sum, although the LAO did shine some light onto the problem of high housing costs in California, many other factors are involved. Meanwhile, millions of the state’s residents continue to struggle to pay their rents and mortgages.

As of the most current figures, the California Public Employees’ Retirement System is 76 percent funded and the California State Teachers’ Retirement System is 67 percent funded. Most bond advisers peg sufficient funding at 80 percent or higher, so both funds are close to that. Both funds project a 7.5 percent annual return on their investments.

As CalPERS explained last May on its website:

“Fact: 

• “CalPERS investments have earned an average 7.6 percent annual return over the past 20 years and 9.4 percent over the past 30 years.
• “CalPERS investments earned 13.2 percent in Fiscal Year 2012-13.
• “CalPERS assumed rate of investment return is a long-term (20 years or more) average. Any given year is likely to be higher or lower than the assumed rate.” 

And last July, CalSTRS stated on its website:

“Continued growth in the equity market, coupled with a bias to U.S. companies, fed a second year of healthy investment returns at the California State Teachers’ Retirement System (CalSTRS), which closed the 2013-14 fiscal year with an 18.66 percent return on its investments. 

“The picture for the fiscal year July 1, 2013 to June 30, 2014 shows investment returns well above the actuarial assumed rate of 7.5 percent. On a long-term, portfolio-wide basis, CalSTRS’ returns reflect the following performance levels: 

“11.2 percent over three years

“13.7 percent over five years

“7.7 percent over 10 years

“8.4 percent over 20 years.”

But when those numbers came out last year, David Crane warned, “A few above-par years will have little impact on pension costs for California’s governments because pension liabilities greatly exceed pension assets and continue growing at a rapid rate.” A Democrat, pension expert Crane advised former Gov. Arnold Schwarzenegger. 

Worst case

So, what is the worst-case scenario? It’s that the pension funds make more modest growth, requiring taxpayers to pick up the tab for the gap between projections and reality.

Money manager John Mauldin looked at CalSTRS. Worst case, to be actually solvent he calculated CalSTRS requires an additional $30 billion per year starting now.

That $30 billion also is six times the $4.5 billion more a year CalSTRS concedes it needs to become solvent.

Ed Ring, Executive Director of the California Policy Center, likewise has estimated how much in annual payments it would cost to close his estimated $71 billion funding gap for CalSTRS. Using a 3.5 percent annual rate of return, Ring estimated the payment to fully fund CalSTRS would be $25.3 billion per year (Note: See Ring’s “Table: Impact of Lower Rates of Return on CalSTRS” in the embedded link).

Both Mauldin and Ring believe future CalPERS and CalSTRS pension fund rates of return on their investments are overly optimistic by half due to a stock market bubble and a failure to take economic recessions into account.

CalPERS funding

If it would take $30 billion per year more to fully fund CalSTRS, how much more would it take to also fund the even bigger CalPERS?

Ring described the problem of estimating the yearly payment to plug CalPERS’ pension funding gap:

“It’s worth noting that for CalPERS, we can’t even get data on how they break out their normal contributions and their unfunded contributions because doing so would require sifting through the financials of every one of their participating entities. But there is nothing uniquely troubling about CalSTRS. … Imagine what would happen if CalSTRS had to pay $25 billion per year … instead of what they actually paid in 2012, $5.8 billion?”

That is, a true accounting would be 4.3 times the current amount. He added, “Replicate these methods with nearly any pension fund in California, and you will almost always get similar results.” 

Add them up: $25.3 billion for CalSTRS and $25 billion for CalPERS. Total = $50.2 billion.

That $50.2 billion needed to be fully funded would amount to 44 percent of the $113.3 billion for the state general fund Gov. Jerry Brown proposed in January for fiscal year 2015-16, which begins on July 1.

Again, this is a “worst case” scenario. It probably won’t come to pass. The U.S. and California economies may continue to perform as expected, with stock market and real estate investments continuing to lift up the funds’ bottom lines.

But the opposite also is something at least to keep in mind.